Small hydropower (SHP) projects were not always low on the government’s agenda, but since the National Democratic Alliance (NDA) came to power at the Centre in 2014, India has just added 860 megawatt (MW) to its SHP capacity.
India categories hydropower of up to 25 MW capacity as SHP. These run on small turbines and do not require damming a river. Their environmental impact, therefore, is negligible.
As of December 2019, India had an installed SHP capacity of 4.67 GW. The capacity addition in financial year 2019-20 has been just 83.4 MW till January 2020.
Most addition since 2014 is from the projects that were started before 2014 and are being commissioned now. The average installation of 265 MW per year from 2007-08 to 2015-16 has reduced by 60 per cent to about 105 MW per year in the last four financial years.
What triggered the decline?
The reason is solar power, much cheaper and simpler to install and has attracted the attention of the government as well as the private sector. While the cost of installing a solar plant in 2020 is about Rs 4 crore per MW, the figure for SHP was almost Rs12 crore per MW.
Moreover, setting up SHP in hilly and forest areas is much more difficult than setting up solar parks.
Even the Indian Renewable Energy Development Agency, a non-banking financial institution under MNRE created to fund renewable energy projects, has reduced SHP funding from 70 per cent to 50 per cent of the total project cost since 2018 as the risks are higher.
In absence of government support, manufacturers of SHP equipment have either moved to solar or diversified to other sectors. India’s SHP equipment production capacity has gone down from 1,500 MW per year in 2014 to 400 MW per year in 2018, according to MNRE data.
The SHP sector was always driven by incentives announced by the central and state governments. Though the government has not done anything to discourage the sector, its disinterest is evident.
Reference- Down To Earth, IREDA website, MNRE website