HYDROPOWER-

Issues related to
feasibility studies
Worldwide, hydropower is a crucial power supply
contributing about 16 percent of global electricity.
 Hydropower plants (HPPs) are
unique compared to other power
supply options such as thermal.
HPPs are always custom-designed
site-specific projects. HPPs require
substantial capital investment, but
they offer extremely low operating
costs and long operating life spans
of 40–50 years that can often be
extended to 100 years with some
rehabilitation.
 The result is extremely competitive
production costs for electricity.
HPPs -custom-designed &
site-specific
 This feature of HPPs lends a uniqueness
to them requiring feasibility studies to be
comprehensive and pass the test
against all parameters
 Technical
 Environmental
 Commercial
 Strategic
 Logistics
Feasibility Studies
 Project developers will continue
project preparation only if technically
suitable solutions are possible at a
potential site, if a preliminary financial
assessment reveals adequate returns,
and if regulatory/permitting
frameworks allow a plant to be
constructed and operated for a
reasonable duration. If preconditions
are met, the next step is a pre-
feasibility study
Pre-feasibility study
 The pre-feasibility study (PFS) undertakes
further project assessment to answer the
following questions.
 1. Is the project financially viable?
 2. If so, which technical option/concept is most attractive?
 During the PFS the design concept is
elaborated. Technical variants and options
are explored and a preferred technical
concept is selected—one that will maximize
financial return.
 The PFS must also evaluate environmental
and social aspects of the project. A
preliminary assessment is undertaken to
identify boundary conditions under which the
project must be developed further, and to
examine potential barriers.
Question 1-Financial Viability
 Hydro-power sector operated in a protected
market in the initial years till the ERC Act of 1998
enjoined the CERC to promote competition,
efficiency and economy in the electricity industry.
 The recommendations of the K.P. Rao
Committee can be regarded as a landmark in
the history of tariff regulation in India, introducing
the concept of "deemed generation“, the concept
of two-part tariff comprising fixed and variable
charges , limiting both the incentive and
disincentive for recovery of fixed costs and
setting up for the first time operational norms for
power stations.
 ABT further improved upon the tariff
determination placing premium on performance
and rationalizing tariff determination.
Implications of tariff
 Implications of changing tariff regimes ( in
a market driven economy), high upfront
cost of hydro, falling prices in the power
market coupled with absence of level
playing field and non-compensation for its
positive attributes have led to a serious
question mark on salability of hydropower.
 Feasibility studies need to overcome this
most important challenge.
 However, increasing global warming
triggered awareness and need for long
term sustainable energy security has
renewed the focus on traditionally
clean power- hydro.
Question 2- which technical
option/concept is most
attractive?
 TYPICAL TABLE OF CONTENTS FOR A PFS
 1. Introduction
 2. Description of project
 3. Topography
 4. Hydrological analysis and sediment transport
 5. Geology
 6. Assessment of seismic hazards
 7. Preliminary environmental and social impact
assessment
 8. Examination and evaluation of layout alternatives
 9. Expected power production
 10. Civil engineering design
 11. Electro-mechanical equipment
 12. Grid connection
 13. Cost estimation
 14. Permitting and licensing process
 15. Planning and project implementation
 16. Preliminary financial analysis
 17. Preliminary risk analysis
 18. Conclusion and recommendation
Issues to address
 These typical 18 chapters broadly
address the various issues in the
feasibility studies.
 Any one of these may render the project
unviable ( mid course corrections may be
possible in some and almost impossible in
others).
 Up to this point in the project
development process, financing plays
only a minor role. However, the pre-
feasibility study is often used to present
the project to developers or promoters.
 The next phase—the feasibility study—is
used to develop a preliminary design and
accurate investment requirements.
Feasibility Study (or DPR)
 The FS structure is similar to that of a
PFS, except FS detail is built up by
collecting and analyzing additional data
such as soil investigations/drillings,
hydrological investigations,
environmental/social research, and
including a detailed elaboration of the
design.
 The FS is built on PFS findings, which
examined several potential technical
concepts and selected the most viable.
The selected concept is optimized during
the feasibility study, which includes the
following core elements:
Technical concept:
 Specification and description of
the most suitable layout and design for
civil works, mechanical equipment,
hydraulic steel structures, electrical
equipment and grid connection, and
optimization of the main power plant
parameters and so forth.
 Despite advancement in knowledge and
innovative solutions available, we have
faced TBM burials ( Parbati-II, Dulhasti
etc), buried channels under dam
foundation ( Malana-II) and reservoirs
silted upto the top ( DTs not being
thought of as future desilting options .)
and many other technical issues.
Hydrology/energy
production
 Emissions of greenhouse gases are
expected to lead to significant changes
in climate over the next century. One of
the many potential effects is that river
catchment runoff may be altered. This
could have implications for the design,
operation and viability of hydroelectric
power stations.
 In the past, feasibility studies have relied
on historical rainfall and river flow data
for the assessment of hydroelectric
potential at a proposed site. However,
climatic change means that these can
no longer be relied on to indicate future
potential.
Geology: Results of
geological investigations
 Geological surprises have quite often been cited
as reasons for time and cost overruns.
 Experience tells us that these have rather been
used more as shields to hide the inadequacies
of investigation and lack of support to the
investigating teams . Surprises cant be ruled out
but should not be so regular in manifesting
themselves.

 NHPC provided helicopters for Chamera-I

investigation team and it had no surprises.

 Attention to details and meticulous investigation

at DPR stage can result in huge cost reduction
( and time as well) .
Cost estimates
 A realistic cost estimate is at the core of
any investment decision. But the past
experience shows that no hydropower
project could be completed at the
estimated completion cost.

 "Delay in execution of 16 projects by four

Central Public Sector Enterprises (CPSEs)
resulted in revision of their initial approved
cost of Rs 30,005 crore to Rs 44,712 crore.
In seven completed/ongoing projects, the
cost overrun was in the range of 53 to
148%," CAG said.
 Cost control remains the biggest challenge.
Power market
 Identification of the off-taker of the
generated electricity, price and duration of the
power purchase agreement is a key aspect of
FS.
 The present power market in India has
become very competitive and with solar
installations on a continuous downward spiral,
selling hydro power has become a challenge.
 The solar space has already seen a significant decline
in tariffs from Rs10.95-12.76 per kWh in 2010-11. The
year 2017 brought the prices further down from Rs3.30
per kWh at Rewa solar park in February to Rs3.15 per
kWh at Kadapa in Andhra Pradesh in April and to
Rs2.45 per kWh in May 2017 at an auction conducted
by state-run Solar Energy Corporation of India for
Bhadla solar park.(2255 MW in Jodhpur)
Financial viability
 Detailed financial (and if required,
economic) analysis estimating the key
financial parameters (IRR, NPV, DSR etc.),
which determine project attractiveness to
both investors as well as lenders.

 The FS should result in a what is termed as

a bankable DPR, a project or proposal that
has sufficient collateral, future cashflows,
and high probability of success, to be
acceptable to institutional lenders .

 The challenge lies in coping with the two

conflicting demands i.e. to be competitive in
the market and also give good returns.
Financing options
 Available equity, debt requirements, and
other resources (e.g., subsidies and
grants).
 Hydro Power is the cleanest, greenest,
bulk non-fossil based power. It has
lowest carbon footprint and due to its
quick ramping ability, it is the best suited
for grid stability as well as for renewable
grid integration.
 Revival of hydropower is under serious
consideration of the government which
shall present numerous options in terms
of the subsidies, tax rebates, grants etc.
 The eligibility and awareness for
availing these must be a part of FS .
Commercial arrangements
 Mode of project execution on [build-
operate-own (BOO) or build-operate-
transfer or BOOT or (BOT)] and
developing the procurement strategy
including the number of contracts to be
let ( Item-rate, EPC or Turn key etc) are
important inputs to be incorporated in
the FS.

 Weighing these options requires

strategic decision making which for
different projects might be different
depending on multiple factors ( location,
logistics, skill availability and resource
optimization to name a few).
Environmental and social
 The importance of Environmental and
social impact assessments and
management plans, such as resettlement
plans and issues related to land acquisition,
diversion of forest land etc need no
elaboration. We have plenty of case
histories where HPPs have struggled
against these issues.
 Environment flows , free stretch of river
flows in a cascade development and basin
studies have lately denied many projects
clearances ( some having been shelved at a
very advanced stage of development like
600 MW Loharinag Pala).ESZs too have
been areas of concern in the development
of HPPs.
Statutory Clearances, Permits
and Licenses
 FS should incorporate all requisite
approvals, clearances and licenses and
the status in respect of each one of
them including the process and
expected timelines.
 These are time taking processes and
may require specific and constant
monitoring.

 This aspect needs focused monitoring

and course-corrections to avoid loss of
time .
 ( To be covered in detail in a separate
lecture)
Risk assessment
Summary of key project risks
 Geological

 Local

 Seismic

 Floods

 Logistic

 Climate

 Site-specific

Identification of risks at the start helps keep fall back

options and mitigation measures planned in time.

 Mitigation options.
Planning and project
implementation
 A comprehensive project implementation
schedule, including manpower and
resource planning is vital to achieve
timely completion and within the planned
budget.

 Though timely completion has been

achieved in quite a few cases ( and
therefore is now becoming more and
more a real possibility ), cost control still
remains a challenge
THANKS