Cabinet Approves RE Status for Large Hydro Power Projects

To enhance hydro power generation, the government has announced that it has approved a slew of measures including providing renewable energy status for large hydel projects and new funding provisions.

Previously, hydro projects up to 25 MW capacity were deliberated as renewables and were entitled for various incentives like financial assistance and cheaper credit. With the government's resolution, hydro projects above 25 MW can also avail the benefits.

"Union Cabinet approves a slew of measures to promote hydro power sector," an official statement believed.

The Cabinet decision has also paved the way for adding hydro capacities of about 45 GW to the renewable energy basket of prevailing 74 GW which includes solar, wind and small hydro.

With the new procedures, large hydro projects (LHPs) would be allowed back loading (reducing) of tariff after increasing project life to 40 years, snowballing debt repayment period to 18 years and introducing accelerating tariff of 2 per cent.

At present, hydro power tariff is expensive than other sources. These measure would help justify the tariff by hydro power projects.

Also, LHPs would now be able to sell renewable energy certificates under non-solar Renewable Purchase Obligation (RPO) to discoms.

Discoms are mandatory to either purchase specified proportion of renewable energy or buy renewable energy certificates in lieu of that.

After notification of these measure, the Hydro Purchase Obligation (HPO) as a separate system within non-solar RPO will cover LHPs. Small hydro projects are already covered under non-solar RPO.

The Cabinet also permitted funding for enabling infrastructure like roads and bridges of Rs 1.5 crore per MW for projects up to 200 MW and Rs one crore per MW for projects above 200 MW.

The declaration noted that discoms are hesitant to sign Power Purchase Agreements (PPAs) for hydro power due to higher tariff, particularly, in the preliminary years.

One of the reasons for high tariff of hydropower is the loading of cost of flood moderation and allowing infrastructure in the project cost.

In this milieu, the decision has been taken to implement measures to promote hydropower sector including providing budgetary support for flood moderation cost and enabling infrastructure cost and tariff rationalization measures to reduce tariff and thus the burden on the consumer, the statement held.