Energetica India Magazine October-November 2021

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 pump- ing mode. 2.4 Environmental Clearance Issue They have large-scale socio-economic and environmental im- plications. HEPs often encounter geological surprises during construction. Environmental clearance thus would remain nec- essary for Hydro Electric Projects (HEPs). Also forest clear- ance 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. There - fore, the hydropower potential including pumped storage hy- dropower, should be reassessed using modern technology and environmental considerations. Thermal projects do not re- quire techno-economic clearance (TEC) from the Central Elec- tricity 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 geol- ogy, especially in the young fold mountains of the Himalayas, only adds to the challenges, particularly for projects requiring extensive underground excavations and works. Such surpris- es during the critical project construction period may lead to lengthy time and cost overruns, impacting the contractual ob- ligations 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, develop- ers 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 uncer - tainty 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. HYDRO POWER 18 energetica INDIA- Oct-Nov_2021