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Role of Hydropower in India’s Energy Transition

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Blog Posts Johns Hopkins School of Advanced International Studies

ISEP – the Initiative for Sustainable Energy Policy – is an interdisciplinary research program that uses cutting-edge social and behavioral science to design, test, and implement better energy...

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  • Oct 8, 2021

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Energy is a key factor in a nation’s socio-economic development. With increasing environmental concerns such as global warming and frequent extreme and irregular weather events, there is a global transition towards energy generation from renewable resources, such as solar, wind, hydropower, tidal, geothermal, bio-power, and green hydrogen.

The United Nations has included affordable and clean energy as one (7th) of its 17 Sustainable Development Goals in 2015. India, a developing economy, is the world’s third-largest energy consumer. The Government of India (GoI) is ambitiously engaged in becoming a renewable economy.

India’s current installed capacity is about 387 GW, with thermal power occupying 61%, hydropower (above 25 MW) occupying 12%, nuclear 2%, and renewables such as solar, wind, small hydropower, biomass gasifier, biomass power, urban & industrial waste power occupying 25% of the share.

India has committed to reduce its emissions intensity per unit GDP by 33 to 25 percent below 2005 level by 2030, and 40% of renewable energy generation by 2030. The short-term targets are to achieve 175 GW of renewable energy installed capacity by 2022, that includes 100 GW solar, 60 GW wind, 10 GW bio-power, and 5 GW. By 2030, the aim is to achieve 450 GW installed capacity of renewables. By August 2021, India has achieved 100 GW of renewable energy capacity, excluding large hydropower.

Hydropower, which generates energy through water falling from a height, plays a dominating role in the global energy transition. Hydropower plants are broadly categorized as storage, run-of-river, and pumped storage. They provide immense benefits, such as clean energy, provides the base and peak load supply, quick ramp-up and ramp-down rates, black start, and operating reserve capability. In addition, pumped storage plants (PSPs) provide grid stability by acting as a green and rechargeable battery to accommodate intermittent renewables such as solar and wind. In 2020, hydropower contributed to 4370 Terawatt-hours (TWh) of global electricity generation, the highest contribution by a renewable energy resource.

Currently, pumped storage hydropower plants provide the largest energy storage capacity (94%) in the world. Reservoir-based hydropower projects also provide flood control and a dependable water supply for drinking and irrigation purposes. In India, the Tehri reservoir in the state of Uttarakhand maintains continuous water flow, especially during religious gatherings in the downstream city of Haridwar, a place of high religious importance.

On April 5, 2020, India’s Prime Minister had announced a 9-minute solidarity period from 9 PM. To achieve this, there was a load drop of about 32 GW for a period of 49 minutes. Hydropower plants played a leading role in maintaining grid stability with a peak ramp rate of 2.7 GW per minute.

India’s Hydropower Scenario

India is blessed with enormous hydropower potential. The hydropower schemes are divided are micro (100 kW or below), mini (101 kW – 2 MW), small (2 – 25 MW), and large (above 25 MW). As per the Central Electricity Authority (CEA) report, India’s hydropower potential is an enormous 84,044 MW at 60% load factor, which amounts to an installed capacity of about 1,48,701 MW for storage and run-of-river based schemes. In addition, 96,000 MW of pumped storage potential is identified.

India has installed about 51 GW and is the fifth largest global hydropower installed capacity of its total hydropower potential. However, India’s hydropower sector has shown a declining trend, especially in the last two decades. This decline is due to the various challenges faced during hydropower development.

Challenges Faced During Hydropower Development in India

The main challenges faced by developers during hydropower development are discussed below:


The hydropower projects are capital intensive and require high upfront costs. In addition, the risks involved in hydropower projects lead to difficulties in the arrangement of finances/ financial closure. Further, the financing is obtained on high premiums. In addition, many states charge a royalty on hydropower developers in the form of 12% free power from the project, which adds to the financial burden of the developer.

Multiple clearance windows

During the planning stage, statutory clearances such as forest, environment, and concurrence/ techno-economic clearance. Other clearances, such as defense and tribal, are dependent on case to case basis. All these clearances are accorded by multiple departments, which makes the process time-consuming.


During hydropower development, social protests are common, especially in storage schemes that resettlement and rehabilitation (R&R) of local population. Also, there is always uncertainty over the public acceptance of the project’s socio-environmental impacts and remuneration settlement between the project-affected families and the developer.

Water sharing dispute

Water, being a state subject, becomes the cause of dispute between state governments on the utilization of river water. In many cases, international disputes have also occurred, with China and Pakistan affecting hydropower development.

Environmental impact assessment issues

The Environmental Impact Assessment (EIA) is a crucial element in hydropower development. In some cases, due to harsh terrain and weather conditions in the project region, developers may compromise on the quality of EIA. Additionally, the lack of skilled and experienced manpower for EIA studies is also a cause of concern. Further, mismanagement or lack of transparency from the developer side during public hearings, increase in the number of projects-affected families/ higher compensation demands leads to conflict and even litigations.

Geological surprises

During planning, there is an uncertainty in scope finalization, as geological surprises are common during actual construction, especially in the Himalayas. The geological challenges can lead to change in the location of civil structures dam, powerhouse, and affect the estimated construction material quantity.

Remote and underdeveloped project location

Generally, hydropower projects are built in remote locations that lack basic infrastructure, road, and communication networks. It leads to two challenges; firstly, the developer has to build the required facilities. Secondly, the project workforce, including senior management and labor, are sometimes reluctant to move to such locations.

Power evacuation issues

Many hydropower projects are built in remote regions, where the energy demand is less than in urban cities. The developed power needs to be transmitted over long distances. There have been cases where the project is not commissioned due to delays in the development of the power evacuation infrastructure, especially in the north-eastern regions where the issue of chicken neck corridor is prevalent. Sometimes, the transmission network cost occupies the leading share of the project’s total cost.

Lack of skilled contractors

India lacks the number of skilled contractors/ workforce necessary to revive the hydropower sector. The technical, managerial competence is lacking to conduct detailed social, environmental impact assessments and timely construction.

Measures to Promote Hydropower

To promote the development of the hydropower sector, the Government of India has approved the following measures in March 2019:

  1. Hydropower projects above 25 MW are included in the renewable energy category. Before this, only projects up to 25MW were considered as renewables category.
  2. A hydropower purchase obligation (HPO) is created under the non-solar renewables purchase obligation (RPO). The share of existing non-solar RPO remains the same.
  3. For tariff determination, the developers have been provided flexibility by backloading of tariff considering the project life for 40 years, debt repayment of 18 years, with an escalating tariff of 2%.
  4. Subsequent to the determination of levelized tariff based on Central Electricity Regulatory Commission (CERC) regulations, the year-wise tariff for a long-term power purchase agreement (PPA) for hydropower procurement may be decided by the developer and DISCOMs on case-to-case basis.
  5. Budgetary support for flood moderation on case-to-case basis will be provided.
  6. Budgetary support will be provided for the cost of enabling infrastructure. INR 15 million per MW for projects up to 200 MW and INR 10 million per MW for projects above 200 MW.

Suggestions to Further Promote Hydropower

The above measures surely advocate the government’s intent to promote hydropower. This section discusses more supportive measures that will provide more impetus to the sector’s growth.

  1. The states should completely defer the 12% free power charged to the hydropower developers as royalty. At least, the free power should be deferred till the loan repayment period.
  2. To plan for holistic hydropower development, it is necessary to carry out integrated river basin-wise studies. It will lead to effective utilization of river water’s potential and improved management of a river’s ecosystem.
  3. Since water is a state subject in India, and electricity is on the concurrent list, there is a need for central and state government’s cooperation to actively work towards hydropower promotion. The states’ water-sharing agreements should include hydropower development agenda.
  4. A nodal agency/ institution dedicated to hydropower development should be established. The agency should be responsible for all the required clearances.
  5. Pumped storage hydropower plants should be incentivized for maintaining grid stability through the ancillary services and by acting as a water battery to support grid integration of intermittent renewables such as solar and wind. Such incentives will also promote private sector investment for PSPs.
  6. The government and private hydropower developers should collaborate with academic/ research institutions to develop indigenous hydropower generating equipments (electrical, mechanical, electronic).
  7. Central and state governments should come forward in creating public awareness programs to highlight the importance of hydropower projects. It will address the negative perception of hydropower projects among the public and minimize the social barriers.
  8. Training and skill development courses/ workshops are required to develop a competent workforce for building hydropower projects.

Hydropower is necessitated to be brought at the forefront of India’s energy transition to achieve the country’s ambitious renewable energy targets.

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