Financing India’s Small Hydro Capacity

India’s scope for hydropower development is vast. Close to 150 GW of theoretical potential exists in the country today, with an estimated 84 GW of economically exploitable capacity, according to figures from the Central Electricity Authority (CEA). Simultaneously, there is a large population of rural poor with no access to grid electricity, an existing peak load deficit estimate at around 10 percent and a rapidly growing economy — and with it an associated increase in power demand.

Indeed, India’s economy reportedly grew at its slowest pace in a decade during the 2012-2013 financial year, but still clocked up a 5 percent growth rate over the year. Prime Minister Manmohan Singh reportedly expressed confidence that the country’s economy would bounce back to an “8 percent growth rate.”

CEA projects electricity demand to increase by around 40 percent by 2016-2017 and just about double by 2021-2022.

However, there are a number of structural issues that impact on the country’s ability to develop large capital-intensive projects like large-scale hydropower and as a result a good deal of attention has been focused on the development of small hydropower capacity, deemed projects with a nameplate output of 25 MW or less.

Authorities report that there is significant potential for hydropower development on this scale. Figures from the responsible agency, the Ministry of New and Renewable Energy (MNRE), estimate the potential for power generation in the country from such plants at over 15 GW.

Recognizing that small hydropower projects can play a critical role in improving the overall energy scenario of the country and in particular for remote and inaccessible areas, the Ministry aims to harness at least half of the potential in the country over the next decade to bring the installed capacity of small hydro to about 7 GW by the end of 12th Plan in 2017. In August 2012, the Minister of New and Renewable Energy, Dr. Farooq Abdullah, said that during the 11th Plan, a capacity of 1,419 MW of small hydro was added compared to 536 MW during the 10th Plan.

Some 967 small hydro projects with an aggregate capacity of 3,632 MW have been installed in India to the end of April 2013, with 24 states announcing a policy to invite private sector bodies to set up projects. In addition, 281 small hydro projects with an aggregate capacity of 1,061 MW are also under construction in various states.

MNRE said it is providing Central Financial Assistance to set up small/micro hydro projects both in the public and private sectors while financial support is also given to the state governments for the identification of new potential sites, including surveys and the preparation of detailed project reports, and renovation and modernization of old projects. In 2012-2013 some Rs.1.6 billion [US $28 million] of funding was released under the Small Hydro Power (SHP) Program.


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