Delay Analysis and Compression Schedule of Hydro Projects

Abstract:

On April 5, 2020, India carried a nine-minute-long electricity experiment to express solidarity and combat Covid-19. Hydropower heralded its heroic capacity to manage the safety and stability of the nationwide electricity grid system despite an unexpected load depression of about 31,089 MW. Hydropower is clean and cheap in long run. It has features like quick ramping, black start and reactive absorption — required for ideal peaking power or spinning reserve. Propelled by large-scale capacity additions in the past decade, India is likely to experience an energy surplus of 8.8% and a peak surplus of 6.8%. While this achievement is a milestone in India’s journey towards ensuring long-term energy security, it must be noted that the per capita energy consumption of India is still 1,075 kWh, which is well below the global average of 3,144 kWh. To ensure sustainable and equitable socio-economic development, the Government of India has launched the ‘Power for All’ programme with the objective of ensuring 24x7 power supply. This programme, India’s increasing urbanization and the rapid growth of the manufacturing sector are expected to be the three key factors that will drive power demand in the country. By design, hydropower is ideally suited to cater to the specific demands of the Indian power system. Thus, there is a need to focus on responsible and accelerated hydropower development, which will address the collective concerns of hydropower developers while ensuring sustainability and addressing socio-economic concerns around developing projects.

1. Introduction:

Hydropower planning and subsequent project development in India are generally carried out on a case-to-case/individual project basis. Moreover, with water being categorized as a state subject, the consent of states impacted by the projects is required. As a result, a large number of hydropower projects with common river systems between adjoining states are delayed due to the lack of interstate agreements on water usage. As water and water power being State subjects, the construction of HEPs is often delayed due to conflicts among riparian States — the Subansiri HEP is a prime example of this. Ongoing conflicts in Assam and Arunachal Pradesh over the utilization of the Brahmaputra River, and the Mullaperiyar Dam conflict between Kerala and Tamil Nadu are also some well-known instances. Furthermore, in the absence of an integrated river basin development plan, there is always the risk of multiple projects being developed on the same river, often leading to possible reductions in peaking capacities and additions of avoidable costs for siltation treatment.



2. Various Issues Impacting Hydro Power Project
2.1 DPR Approvals
The current approval process for a detailed project report (DPR) is provided in section 8 of the Electricity Act of India, 2003. However, the existing procedure, which mandates the vetting of DPR documents by various entities such as the Geological Survey of India, the Hydrology Directorate and Inter-State Matters Directorate, Ministry of Environment, in addition to approvals from the CEA makes the entire process of preparation and approval of DPRs fairly complex, time consuming and expensive. As a result, project developers are reluctant to invest adequate time and finances in DPR preparation, leading to inadequate project reports, which in turn result in disputes related to project cost escalations or revenue assessments.



2.2 Land Acquisition
Land acquisition has been one of the other key reasons for delays in hydropower projects. The Land Acquisition, Rehabilitation and Resettlement Act, 2013, and its subsequent amendments have attempted to streamline the land acquisition process through a number of provisions. However, some issues in the land acquisition process still remain. For instance, ideally, land acquisition should be completed before a project is tendered. In India, however, projects are often awarded with only part of the land physically acquired. This leads to delays on account of undervaluation of land price, dependence on state governments for land acquisition, etc. Furthermore, the unavailability of reliable land records with the requisite government departments often adds to existing complexities. In addition, the development of associated infrastructure such as roads and bridges for improving accessibility to the project site increases the cost of project development, thus greatly affecting the financial viability of the project. Furthermore, the lack of infrastructure facilities such as schools and hospitals affects the movement of skilled manpower to isolated project sites. Hydropower projects are more than engineering ventures. As the land acquisition process is elaborate it requires public hearing and approval of the Gram Sabha. Resettlement and rehabilitation (R&R) issues are not only sensitive but also entail substantial cost. It has been experienced that projects do not envisage adequate cost on these items at the approval stage. Subsequent arrangement means cost and time overruns. Adequate R&R cost should be made integral part of the project cost. The project management team should also include experts from social science, environment as well as communication. If HEPs could be allocated after obtaining requisite clearances on the pattern of Ultra Mega Power Projects, it would avoid undue delay and cost overrun.

2.3 Insufficient Market Depth and Scope
The Indian power market is still at a nascent stage of development, with the current market structure preventing hydropower developers from realizing the potential benefits of meeting peak demand as the tariffs for both peak and off-peak powers are still undifferentiated. The volume of short-term market, which allows different instruments for peak and off peak supply, is also very low. Additionally, as highlighted before, with the introduction of huge renewable capacities in power systems, stability in terms of voltage regulation, reactive power control, etc., are immediate requirements. Following the adoption of the National Tariff Policy (2016), the CERC has introduced ancillary services regulations for the Indian power sector as the market till date has been extended only to frequency support ancillary services. Hydropower, which was originally expected to benefit as a result of these regulations, has found limited traction in the frequency support market, given the limited ‘un-dispatched’ surplus available from hydro stations. Moreover, it is observed that during high hydro periods, plants operate above 100% load, leaving limited margins for up-regulation without risking any spillage. On account of the limited market benefits and undifferentiated peak and off-peak tariffs, four major pumped storage projects have not been upgraded to run in the pumping mode.

2.4 Environmental Clearance Issue
They have large-scale socio-economic and environmental implications. HEPs often encounter geological surprises during construction. Environmental clearance thus would remain necessary for Hydro Electric Projects (HEPs). Also forest clearance takes time, the reason for the same is still unknown to most of us. Several HEPs were dropped or had their design and capacity modified due to environmental considerations. Parameters like e-flow, free flow stretch, eco-sensitive zone, impact on wild flora and fauna are now better defined. Therefore, the hydropower potential including pumped storage hydropower, should be reassessed using modern technology and environmental considerations. Thermal projects do not require techno-economic clearance (TEC) from the Central Electricity Authority (CEA), but for HEPs with capital expenditure above `1000 crore, the concurrence of the CEA is required. Site-specific changes required during construction also need approval. Clearance is given in consultation with the CWC, and takes an inordinately long time. Processes must be revisited to reduce the time taken for the TEC. A unit of the CWC may be co-located within CEA itself.

2.5 Risk-sharing profile of Hydro Projects
Hydropower projects are site specific and developmental works greatly depend on geological, topographical and hydrological considerations. In such a scenario, the risk of unanticipated site conditions is ever present. India’s relatively complex geology, especially in the young fold mountains of the Himalayas, only adds to the challenges, particularly for projects requiring extensive underground excavations and works. Such surprises during the critical project construction period may lead to lengthy time and cost overruns, impacting the contractual obligations of developers. The limited availability of experienced engineering, procurement and construction (EPC) contractors in India only adds to the total project risk.

At the other end of the value chain, because of the existing cost-plus tariff determination regime for hydropower, developers may, in effect, ‘pass through’ the resultant increased costs to the ‘off-takers’ of the hydro produce. This is subject to the necessary due diligence, which results in even higher hydro tariffs. Long construction periods lead to high interest during construction. Also, delays in cash inflows increase uncertainty and risks, resulting in higher risk premium on financing charges.

The capital cost of hydro projects ranges between 60 million INR/MW and 80 million INR/MW as compared to 30 million INR/ MW and 50 million INR/MW for thermal plants. Hydro projects require higher upfront costs to address greater complexities and risks.

Non-availability of long-term debt in the Indian capital market necessitates higher provisions for depreciation to generate revenues required to meet repayment obligations.


3. Technical Knowhow
Bidding norms for hydropower projects in India are also not standard across states, with varying minimum thresholds for royalty/free power, upfront premiums and free equity. Moreover, the bidding norms (particularly upfront premium and free equity) themselves lead to significant cash outflows even before the commissioning stage, impacting project financials and viability. Because of various reasons, schedule of Civil Work of any Hydro-Electric Project is shifted considerably. To make up above delay in civil work, which is many a times beyond control, we need to compress/crash Schedule of Hydro-Mechanical Work, particularly Erection / Commissioning. The aforesaid compression will enable early completion of Project and resultant revenue generation. With suitable modern cranes / erection machinery / infrastructure, a good teamwork, modern communication system, support of all concerned and parallel working with Civil Work, HM Work schedule can be compressed considerably. Each Hydro Project is to be reviewed in totality on a comprehensive basis and innovative measures to be adopted as per situation to ensure compressed schedule on sustained basis.

Compression of Schedule is possible in following areas:
i) Design & Engineering
ii) Procurement of Long Lead Items
iii) Shop Manufacturing
iv) Transportation
v) Site Manufacturing
vi) Erection & Commissioning

i) Design & Engineering
Latest computerized design technique with tailor-made software is to be followed for cost-effective preparation of Design & Engineering within shortest possible period. (Generally within one month)

ii) Procurement of Long Lead Items
Major Long Lead Items are as below:
• Special Steel (for Penstock, Gate Skin plate etc.)
• Bearings / self-lubricating bush (For Trunnion)
• Hydraulic Cylinder & Power Pack
• Pre-Stressed Anchorage System, if any.
• Cranes / Hoist

The above Long Lead Items should be designed in a way that the same can be sourced as per compressed schedule. Local sources are to be developed to reduce procurement time / cost and also following “Make in India” initiative. Hydraulic cylinder and self-lubricating bush are similar items, which presently are imported from Germany/Europe/USA involving high figure of Foreign Exchange and long transportation / delivery time.

iii) Shop Manufacturing
Shop Manufacturing cycle time should be reduced by adopting modern and suitable process flow wherein all shop work i.e. Plate cutting, edge preparation, shaping, fixing, welding & machining are on automatic or semi-automatic mode.

iv) Transportation
Size and weight of manufactured components are to be designed suitably for economical transportation from shop to site by Trailer / Truck. This aspect should be taken care itself during design engineering stage. Penstock of cascading design may be followed, particularly where heavy site fabrication is not possible / feasible.

v) Site Manufacturing
Penstock is mostly manufactured at site. Here also automatic / semi-automatic mode of welding will reduce time, reduce manpower, improve quality and ensure cost-effectiveness. Similarly, low head Radial gates can also be done at site as machining is not involved in preparation of skin plate assembly and no of gate required are more.


vi) Erection & Commissioning
The two important Schedule Compression Techniques (Fast-Tracking and Crashing) are generally used by the Project Manager during the lifecycle of the Project from Project Initiation to the Project Closure to bring back the project in line with the Schedule Baseline without changing the project Scope. Fast-Tracking and crashing, these are the two Schedule Compression Techniques for any project. Fast tracking always perform activities in parallel without any addition of Resources but Crashing perform activities in sequence by including additional resources to reduce the Project Schedule.

Adequate resources (machinery, manpower & money) should be provided to compress time schedule of Erection & Commissioning. Modern erection techniques should be followed where as far as possible assembly work is done on ground level and heavy capacity cranes are used to lift the same and erect. Again, auto / semi-auto mode of welding method is to be followed for penstock site welding / erection.

For example, Radial Gate / Surge Shaft Gate Embedded Part work should start early along with stage wise completion of civil work. Work during monsoon period can be carried out by using suitable barge and floating crane resulting utilization of 3 to 4 months of idle time. Furthermore, early commissioning may be achieved by erection of necessary & sufficient nos. of Hydro Mechanical items in the system. Work of Balance items may be completed later suitably even when generation and revenue earning have already started.

Following above concept / plan / modality, HM Erection & Commissioning time schedule can be reduced by 40 - 50%. Thereby, overall time schedule of Hydro Project will reduce around 15-20 %. The cost against additional resources to achieve the same is marginal compared to benefits accrued towards early revenue earned.

4. Conclusion and Remarks
Time is the essence of any hydro power plant and as such based on the defined opportunities, the following recommendations are proposed.

First, linkages between government’s strategy to promote economic growth and government’s objective to reduce poverty should be made more explicit in terms of policy formulation and implementation. The establishment of Poverty Reduction Fund (PRF), for instance should be accompanied with structural measures to address poverty linking government revenues from hydropower with government expenditure in relevant sectors (health and education).

Second, in line with the basic principles in the country’s national socio-economic development plans (decentralization, good governance), it is proposed that the issue of public participation in hydropower development projects to be mainstreamed as part of general awareness campaign. Local population and potentially affected people should be made aware about the existing rules and procedures in hydropower development in relation to their rights and access to natural resources (land, water and the environment). Currently, this awareness raising took place within each individual project set-up, conducted under the leadership of private sector actors (the respective power companies). While this current set-up indirectly obliges private sector actors to follow the defined rules and procedures, it also highlights the potential conflict of interest that might occur when private sector actors become the only de-facto decision maker in shaping the overall process of public participation. The proposed awareness raising program could be initiated at district and provincial level, with involvement from district/ provincial government, civil society groups and others with direct access to village communities where hydropower projects were proposed or planned. Elements of the awareness raising program should include basic information with regard to project procedures and rules in relation to compensation arrangements, formulation of mitigation and environment management plan. Last but not least, this awareness raising program should be structurally supported by better information disclosure applied by government agencies at different administrative levels.

Third, Govt. policy formulation and review should be incorporated into the project’s feasibility studies. While the incorporation can be considered as a structural issue, its application does not require structural revision of the existing policies and legal framework. Current policies, rules and regulations can still be applied accordingly. The idea to change the sequence of hydro project review should be presented to the relevant government agencies in hydropower development.

Fourth, in line with the issue of land titling it is suggested that the provision of sufficient budget to ensure the completion of current land titling program in the rural area. Furthermore, it is also proposed the incorporation of the agency responsible for approving land concession as part of the negotiation processes in the different stages of hydropower development (i.e. concession agreement, project development agreement).

Finally, the technical knowhow and Schedule Compression Techniques (Fast-Tracking and Crashing) discussed in this paper should be implemented for accelerated completion of hydro power project.

- Dr. Mukulesh Debnath, Vice President (Structural)/Hydro & Bridges Texmaco Rail & Engineering Ltd, Kolkata