In the early 21st century, a rapidly growing Indian economy was thirsty for more electrical power. Blackouts were common in most Indian cities, and rural areas were yet to be electrified. Industries had irregular electric supply, which in turn affected investments.
In these conditions, the government had a new idea: to generate thousands of megawatts of electricity with hydroelectric turbines in India’s Northeast, then to be sold to power-hungry consumers in the rest of India.
This idea was notable for two reasons. First, it did not consider issues like transmission losses. Second, it did not take into account fundamental technological changes pertaining to wind and solar power generation.
But as it happens, this idea did not die out either. In 2008, the government pitched a new project along the same lines, called the Etalin hydropower project, in Arunachal Pradesh. Jindal Power was subsequently contracted to realise it even though the underlying economic rationale is unclear. To be fair, the cost of solar power in 2008 was more than Rs 20/unit and of wind was about Rs 6/unit, and hydroelectric power promised to be cheaper than both.
At that time, both solar and wind power technologies were in their infancy, and analysts were of the opinion that renewable power would at best remain a small fraction of the total demand.
Fast forward 12 years and the situation is significantly different. Today, solar and wind power technologies have matured considerably and are giving conventional power a run for their money, in India and around the world. Solar and wind power are being generated at less than Rs 3/unit. In addition, the cost of battery storage has fallen by 90% in the last decade, thus easing most issues of intermittency and allowing distributed power generation to compete with the traditional electricity business model.
As a result, many countries and regions around the world are going for 100% renewable power. And politicians, businessmen and consultants are preparing investors for such a scenario. Conventional power generation units built in the 20th century are being shut, often to be replaced by renewable power generation units. New investment in thermal, hydroelectric and even nuclear power are being overshadowed worldwide by investment in renewable power.
In this context, the Etalin hydropower project makes little sense. Though construction on the project is yet to begin, its fate currently rests with the Forest Advisory Committee (FAC) of the Union environment ministry. After much deliberation, most recently on April 23 and after an environmental study submitted to it drew heavy criticism for faulty method, the FAC has neither ‘recommended’ nor ‘deferred’ the project (both official terms), and instead asked the power ministry and other government bodies for further inputs. However, just an economic consideration could provide enough ground for the FAC to decline the project.
The Etalin hydropower project aims to generate about 3,000 MW of electricity with an investment of about Rs 25,000 crore, likely to increase over the time Jindal Power takes to execute the project. Solar power will require half as much, around Rs 12,000 crore, to generate the same amount of power. In addition, the generation facility can be located closer to the consumption centres, considerably shortening the transmission distance.
The Etalin project on the other hand will generate power in the Dibang valley, over 500 km away from Guwahati, 1,000 km from Kolkata, and much more from every other major metropolitan centre in the country. Even if the Government of India subsidised infrastructure like roads and transmission lines, the cost of power for the end consumer will be many times higher than what they can get from renewable sources.
Indeed, the current tariff for wind and solar energy in India is about Rs 3/kWh, while the tariff for power from Etalin could be over twice as high, around Rs 7/kWh, and up to Rs 10/kWh for more distant centres of consumption. Note, however, that the companies involved with the Etalin project are yet to reveal the actual tariff.
Even before the novel coronavirus pandemic hit India, the demand for electricity was lower than the country’s generation capacity, resulting in many thermal power plants running at low plant load factor. As a result, the companies operating thermal power plants are incurring losses while the banks that lent money to these companies are classifying them as non-performing assets (NPAs).
Of course, no one expected government officials or members of Jindal Power to have so much foresight in 2008 – when the Etalin project was dreamed up – but there is no reason they can’t see now that the project is infeasible. In fact, if they don’t, there is a real danger of the Etalin project becoming very costly to operate and therefore costly to abandon. And like many thermal projects in the rest of India, Etalin could also become an NPA and incur losses for everyone involved.
The best way forward to power Northeast India as well as all of India is to invest more in distributed power generation using renewable sources of power proximate to the point of consumption. As mentioned earlier, the falling cost of battery storage allows us to make up sufficiently for those periods when the Sun is not shining or the wind is not blowing.
In the post-pandemic world, the International Energy Agency wants recovery to be based on eco-friendly technologies, perhaps because ecological disruption is closely tied to the odds of more viruses spilling over from animals to humans. As a pathfinder economy of the 21st century, India should also plan its economic recovery based on renewable power, distributed power and a development model that is as environmentally non-disruptive as possible. It is already on track to generate 175 GW of renewable power by 2022.
Abhinav Bhatnagar works for the renewable energy sector.