With a quantum leap in household electrification in India in recent years, energy policy discussion has shifted towards questions of security of supply and access to clean energy. These issues are particularly relevant in the context of remote geographies, where energy penetration involves high capital and operational expense.

In the Himalayas and the north-east of the country, energy production is linked with concerns around environmental degradation and climate change, given the dependence on large hydropower projects in these regions. Increasingly erratic rainfall and the fluctuation in reservoir levels are affecting the regions’ power generation and supply.  

Concepts like decentralised renewable energy (DRE) systems and community-level energy management are increasingly the focus of energy policy strategy. DRE systems offer significant potential for increased equitable and sustainable access to energy, particularly in remote areas. Such systems not only reduce people’s reliance on conventional fuels like firewood and diesel, but can also provide surplus energy to augment existing grid capacity.

What’s more, decentralisation decreases the dependence of communities on central grids, and increases self-reliance in terms of energy access and management.

Decentralised renewable energy systems hold immense potential for increased equitable and sustainable access to energy, particularly in remote regions.

A key initiative 
In February 2022, India’s Ministry of New and Renewable Energy (MNRE) introduced a ‘Framework for promotion of decentralised renewable energy livelihood applications’. The framework aims ‘to facilitate an enabling ecosystem for wide adoption of DRE-based livelihood applications in the country… to provide clean and reliable energy but also help in increasing productivity and income’.

In the past, MNRE and various state governments have supported DRE interventions in a somewhat disaggregated manner, which was not part of a larger nationwide plan. This included the installation of standalone solar-powered agricultural pumps under a scheme to augment solar capacity and promotion of subsidised off-grid solar power among farmers for captive consumption and income generation in the western Indian state of Gujarat.

However, a look at the new framework and recent sectoral outlook reports reveals an increased focus on solar and biomass energy, and a relative absence of small hydro projects (SHPs).

Since September 2017, there is officially no financial support scheme under the MNRE for the development of SHPs. However, in India, projects such as SHPs that are classified under 25 MW capacity are critical to meeting the clean energy needs of marginalised communities in the Himalayas and the north-east, given their negligible environmental impact and significant job-creation potential. So, despite an increased focus on DRE and the importance of small hydro within such systems, what explains the absence of SHPs from current energy policy?

Historically 
The development of SHPs in India goes back over 100 years with the commissioning of a 130 kW power project in the Darjeeling hills of the eastern Himalayas in 1897 by the British.

However, after India’s independence, successive governments prioritised the development of large hydro projects given their higher generation capacity and critical role in meeting irrigation water requirements. Even so, small hydro became the go-to option in inaccessible geographies across the country, with the first national study on its hydropower potential conducted between 1987 and 1996 revealing a total installed capacity of 6,782 MW.

The most recent study, conducted in 2016, revealed that India had 21,133 MW estimated potential for power generation from 7,133 small and mini-hydro power projects. As part of its commitments under Agenda 2030, India’s stated target of adding 175 GW of renewable energy installed capacity by 2022 included 5 GW from small hydro. A modest target, the country achieved it back in 2021.

Seen in conjunction with the discontinuation of financial support for such projects since 2017 and their absence from current DRE discourse, small hydro seems to have been slowly, although not explicitly, phased out of India’s energy policy priorities.

India has 21,133 MW estimated potential for power generation from 7,133 small and mini- hydro power projects
Photo: Wiki Commons

Contributing factors 
Several factors seem to have contributed to this phasing out. In addition to the 5 GW target under the capacity addition objective for 2022 being met, sectoral experts mention the completion of total realisable small hydro potential as a major factor. Although there is no publicly available data on ‘realisable’ potential, it is said to be 30–40% of the total estimated potential of 21,133 MW. This figure is based on the 2016 study and leaves much scope for a fresh mapping of small, mini and micro hydro structures in the country.

A sectoral review conducted by Deloitte in 2017 observed the declining growth of small hydro projects in India, but also identified several causes behind it related to construction, land availability, tariffs, power evacuation and operations. The review found a general lack of private investment given the sector’s relatively low appeal and poor regulatory structure compared to solar and wind power.

It also found a lack of robust hydrological data for analysing the feasibility of projects, infrastructural problems and timeline risks due to the geographical location of some projects, high costs and delays in land acquisition, the relatively high cost of power evacuation, and different tariff regimes across states which bring profitability into question.

Anecdotally speaking, development costs for small hydro projects hover around INR 2.5–3 Crores per MW (£25,000–30,000 per MW) in India, which is still less than that of solar projects. Private developers also complain about the lack of regulation in the sector and the inherent risks.

On the regulatory side, the implementation and governance of small hydro development lies with India’s state governments. In practice, each state has its own policy for promotion and development of such projects based on a combination of region-specific requirements, fiscal capacity and, in many cases, political expediency. For any investor, this means navigating a multitude of policy frameworks and legalities for every new project.

Given such roadblocks, many experts see small hydro in India as a ‘thing of the past’ despite its immense potential for clean energy access and community-level energy management within DRE systems in hilly and mountainous regions.

At the same time, the government has given a huge push to large hydro development in these regions despite concerns around increasing land subsidence, likely owing to infrastructural development and large dams. Indeed, there is a suspicion that India’s policymakers have prioritised capacity enhancement and profitability over environmentally conscious and sustainable energy access. Given such competing issues and an entire sector now silent on small hydro, is a reasonable way forward possible?

Looking ahead – a suggested action plan 
It is a foregone conclusion that India needs to revive its small hydro sector for any long-term impactful capacity enhancement under DRE. But to actualise this, policymakers first need to see power generation and energy access in remote areas as a public good, akin to a poverty alleviation programme.

Once this is institutionalised, public-private partnership models can be floated as part of a national plan for small hydropower. This will decrease the risk profile of the sector for private investors. Additionally, with local nodal agencies being critical to such models, the operation and maintenance of projects can be gradually handed over to them. Since such agencies have representation from locals, this would become an exercise in empowering marginalised communities with their own energy generation and management systems, enabling a just transition in the long run.

In addition, the small hydro sector in India requires a fresh mapping of available resources and potential for investors to be able to gauge the financial and technical viability of new projects. This needs to be done in tandem with high quality mapping of existing projects in terms of their performance as well as load factor, since many such projects were commissioned decades ago.

The promotion of renewable energy as a climate solution globally has largely been an exercise in the creation or augmentation of central or national grids, in line with fossil fuel-centric energy generation systems. This is also the case in India where energy access is primarily a function of capacity expansion of the national grid.

This strategy has been detrimental to the development of the peripheral and remote regions of the country where, even after significant household electrification, the quality and reliability of available power has remained poor.

DRE provides an alternative to the current state of affairs. However, the preponderance of solar and biomass power, and the decline of SHPs within new policy frameworks on DRE, indicate a lack of consideration for the specific geographical and environmental needs of the Himalayas, the north-east, and other hilly regions of India.

At the heart of these issues plaguing the small hydro sector in India is a policy regime that does not see energy access in remote areas as a ‘public good’ requiring significant public investment. Thus, for any meaningful expansion of DRE across India’s peripheral regions, people-centric energy policies need to be mainstreamed.