Steady growth in small hydro power; challenges remain: ICRA
ICRA Ratings has come out with the sector note "Steady growth in small hydro power; however significant challenges remain..."
ICRA Ratings has come out with the sector note "Steady growth in small hydro power; however significant challenges remain..."
While India‘s total installed capacity for small hydro power (SHP) units reported a significant increase from 1,909 MW as in March 2006 to 3,300 MW as in January 2012, thereby taking up SHP‘s share of the country‘s total installed renewable energy (RE) capacity to almost 15%, considerable potential1 still remains untapped across States with favourable SHP potential.The low utilisation of the country‘s SHP potential is attributable to several factors, including: challenges in setting up plants in difficult and remote terrain; delays in acquiring land and obtaining statutory clearances; inadequate grid connectivity; and high wheeling and open access charges in some States.SHP plants have certain inherent advantages: they generate "clean energy" at a competitive cost; they have features that make them suitable for peaking operations; they are less affected by rehabilitation and resettlement (R&R) problems vis-à-vis large hydro power plants; they can meet the power requirements of remote and isolated areas; and they use mature and largely indigenous technology.In ICRA‘s view, the demand for SHP is likely to go up significantly, given the support now available from improved fiscal and regulatory measures:The Government of India‘s National Action Plan for Climate Control (NAPCC) has set the minimum share of RE in the overall energy procurement of utilities at 10% by 2015 and 15% by 2020. Thus, even if SHP were to maintain its current 15% share of the total RE capacity, the additional demand in the medium term would be significant.The Central Electricity Regulatory Commission (CERC) has come out with several measures, including: generic tariff norms for SHP projects; norms and pricing framework for RE certificates; and an amended grid code to ensure smoother offtake and transmission of RE power by utilities.Under the Central Financial Assistance (CFA) Scheme of the MNRE, capital subsidy is now provided to both private and State projects and for renovation & modernisation of SHP plants. Besides, technical support is being provided to SHP units through Alternate Hydro Energy Center (AHEC), IIT, Roorkee.Recent amendments to grid code augur well for SHP plants
In the matter of grid integration, the recent amendments in Grid Code are a positive for SHP plants with less than 10 MW capacity. As per the amendments, renewable energy power plants including SHP plants with installed capacity of less than 10 MW (excluding higher capacity SHP plants and nonfossil fuel based cogeneration plants) will be treated as ‗MUST RUN‘ power plants and will not be subjected to ‗merit order dispatch‘ principles. Also, the allowed variation of up to (+/-) 30% of the schedule and the burden of applicable Unscheduled Interchange (UI) charges to be shared among system users on an all-India basis and not on project developers and permission to fine-tune schedules (based on the forecast) as close as three hours before the actual generation should facilitate further integration of SHP projects.Disclaimer: The views and investment tips expressed by investment experts/broking houses/rating agencies on moneycontrol.com are their own, and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.To read the full report click on the attachment 
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