In India's energy sector, the hydropower industry emerges as a steady force, harnessing the potential of flowing water to generate electricity. Owing to the complex geography of India, multiple river channels, and elaborate drainage pattern, this sector has attracted the attention of investors seeking sustainable opportunities. Currently, hydropower makes up for 12.3% of India’s total utility power generation capacity, painting a picture of potential and growth. As India endeavours to meet its growing energy demands while addressing environmental concerns, hydropower stands as a vital player in the country's energy mix. In this article of our industry analysis series, we will delve into the intricacies of India's hydropower industry, offering investors a comprehensive overview, insights into major companies, challenges faced, future prospects, and the industry's alignment with India's sustainability initiatives.
Potential in India
The economically feasible and viable hydroelectric potential of India is approximated to be 148,701 MW. There is an additional estimated exploitable capacity of 6,780 MW from smaller hydro schemes with capacities below 25 MW. Moreover, 56 sites suitable for pumped storage schemes, totalling an installed capacity of 94,000 MW, have been identified. However, in central India, the hydroelectric power potential from river basins such as Godavari, Mahanadi, Nagavali, Vamsadhara, and Narmada has not been extensively developed, primarily due to potential opposition from the tribal population.
Hydropower Industry Overview
India's hydropower industry has witnessed significant growth and transformation over the years. With a vast network of rivers and diverse topography, the country holds immense hydropower potential. According to the Ministry of Power, as of 2022, India's total installed hydropower capacity is around 50,000 MW, contributing approximately 13% to the country's total power generation. This sector plays a crucial role in ensuring energy security and reducing dependence on fossil fuels, aligning with India's commitment to a greener and more sustainable future.
India has utilised only 29% of its hydropower potential, lagging behind the US and European Union numbers, which have developed over 80% and 70%, respectively, according to information presented in Parliament. The Central Electricity Authority's Reassessment Study from 1978-1987 revealed a hydropower potential of 1,45,320 MW, of which 42,104.6 MW (29%) has been developed, and 15,023.5 MW (10.3%) is under construction.
Major Notable Companies
Several key players dominate the Indian hydropower landscape, leveraging their expertise in developing, operating, and maintaining hydroelectric projects. Among these, NHPC Limited stands out as a prominent government-owned entity, with a vast portfolio of projects across the country. Private players like Tata Power and JSW Energy have also made substantial contributions to the sector, emphasising technological innovation and efficiency in their operations. The collaborative efforts of public and private enterprises have been pivotal in advancing the hydropower agenda and creating a more robust and diverse energy infrastructure.
Company Name | Market Cap | P/E Ratio | Last Traded Price |
JSW Energy | ₹ 68,492 Cr. | 43.0 | ₹ 416 |
NHPC Ltd | ₹ 54,715 Cr. | 14.0 | ₹ 54.5 |
Tata Power Company Ltd | ₹ 84,996 Cr. | 24.9 | ₹ 266 |
SJVN Ltd | ₹ 32,743 Cr. | 31.5 | ₹ 83.3 |
Energy Development Company Ltd | ₹ 90.6 Cr. | 44.2 | ₹ 19.1 |
Challenges Faced
Despite its inherent potential, the hydropower industry in India faces a myriad of challenges. Environmental concerns, displacement of local communities, and complex regulatory processes have slowed down project implementation. Climate variability and changing precipitation patterns pose additional risks to hydropower operations, affecting both generation capacity and water resource management. In the latest example, the recent floods in the North East brought a lot of hydropower projects to standstill.
As per an ET report, Power Minister R K Singh cited challenges such as remote locations, unpredictable geology, natural calamities, environmental concerns, rehabilitation and resettlement issues, law and order, and interstate disputes as hindrances to further development.
These challenges underscore the need for a balanced approach, where economic development through hydropower is achieved without compromising environmental sustainability and social well-being.
Prospects and Future Trends
The future of India's hydropower industry holds promise, driven by technological advancements and evolving energy policies. The government's push for cleaner energy sources, coupled with international commitments to reduce carbon emissions, positions hydropower as a key contributor to India's sustainable energy transition.
For example, Maharashtra has decided to boost large-scale private investment in the hydropower sector with a dedicated policy for Pumped Hydropower Storage (PHS) Projects through Public Private Partnership (PPP).
Currently, Maharashtra generates 10,757 MW of non-conventional energy, with a target of reaching 25,000 MW by 2025. However, solar and wind energy alone are insufficient, creating gaps in renewable energy capacity that may challenge the grid. This also introduces a headroom for growth in the hydropower sector.
The introduced policy aims to address this by promoting megawatt-level energy storage capacity, encouraging existing pumped hydro solar hybrid power projects, facilitating inter-basin transfers, and attracting private sector investments.
The policy seeks to select developers through direct allotment or competitive tender processes, promoting capacity increase through the Udchan project. The energy storage system is seen as eco-friendly and cost-effective, providing backup energy in case of interruptions or breakdowns in power generation. The Union Ministry of Energy also supports and encourages Pumped Hydropower Storage projects nationwide.
As technology continues to improve, innovations such as small-scale hydropower and pumped storage projects are gaining traction, providing additional avenues for growth and flexibility in the sector. Investors eyeing the long-term potential of India's hydropower industry may find opportunities in supporting these innovations and contributing to the sector's resilience.
India's Sustainability Efforts
India's commitment to sustainable development is evident in its efforts to expand renewable energy capacity and reduce carbon emissions. The National Action Plan on Climate Change emphasises the importance of hydropower in achieving a low-carbon economy, recognising its role in balancing the grid and providing reliable power. The hydropower sector aligns with India's ambitious target of achieving 40% of its total installed capacity from renewables by 2030. As a result, companies operating in the hydropower space are witnessing a rise in demand, driven by both government initiatives and the growing awareness of environmental sustainability among consumers and investors.
In addition to supporting India's sustainability goals, hydropower companies are exploring new business models and collaborations. Partnerships with technology companies and research institutions are fostering innovation in areas such as smart grids, energy storage, and predictive maintenance. These initiatives not only enhance the efficiency of hydropower operations but also position companies to adapt to the evolving energy landscape.
The Gist
India's hydropower industry offers a compelling narrative for investors seeking sustainable opportunities in the country's energy sector. The sector's historical significance, coupled with its potential for growth, makes it a noteworthy player in the broader renewable energy landscape. As the industry grapples with challenges and embraces innovative solutions, investors can find avenues to support and benefit from the ongoing evolution of India's hydropower sector. In navigating the currents of this dynamic industry, investors may discover not only financial returns but also the satisfaction of contributing to India's sustainable energy future.
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