UMPP for Hydro Projects: Demands for advance premium by states a major hurdle

Govt of India , in its effort to ramp up hydro power capacity of the country mulls the idea to develop UMPP ( Ultra Mega Power Plants) in hydro projects. India is currently developing coal based UMPP and already 4 UMPPs have been awarded.

In UMPP, SPVs ( Special Purpose Vehicles) are created for particular UMPP where the SPV facilitates in aquiring all kind of clearances and the SPV is transferred to the successful bidder at a later stage.

But in case of hydro projects which are extremely site-specific and are not as modular as thermal projects, a huge amount of preparation is required. The detailed project reports need to be prepared upfront.The states have not come up with the DPR at the time of awarding the hydropower projects.

With the share of hydropower falling from 40% to 25% in the past 20 years, the government is worried, as the sector accounts for only 32,000MW of the country’s 147,000MW power generating capacity.

In an attempt to create large hydropower capacities and attract investment in the sector, the power ministry had written to Uttarakhand, Himachal Pradesh and Arunachal Pradesh, asking them to identify and allocate projects with a potential of at least 500MW, to be awarded through the UMPP model. State govt are skeptical about the huge hydro power projects as these projects cause environmental problems as well as severe R&R issues. State govt are demanding an upfront fee from the developers which does not augur well with the project developers and sometimes they back out of the projects.

Last year, state-owned NTPC Ltd’s refusal to pay an advance amount led to the cancellation of a contract to develop two hydropower projects in Arunachal Pradesh at an estimated cost of Rs22,500 crore. The state wanted NTPC to pay Rs5 lakh per MW as upfront payment for the projects at Etalin (4,000MW) and Attunli (500MW).

Arunachal Pradesh government charges an upfront premium of Rs1 lakh to Rs6 lakh per MW, depending upon the size of the project. The north-eastern state is at the centre of the controversy because it has the highest potential for hydropower in India. The potential of hydropower of all the north-eastern states and Bhutan is about 58,000MW. Of this, Arunachal Pradesh alone accounts for 50,328MW. In northern India, Himachal Pradesh has a potential of producing 20,376MW from hydropower plants and Uttarakhand, 16,500MW.

The upfront premium is the bone of contention in case of the proposed hydro UMPP. On one side, govt fears to identify and declare a site for the project as it may backlash with the people rejecting the idea and in an election year the govt do not want to take any risks.

And in the other side, the upfront advance premium demanded by the govt do not seem to hold water with the project developers as they are skeptical of the project coming up. These hurdles do need some serious thought and should be resolved in an amicable manner so as to develop India as a power hub.

Government increases budget outlay for power sector in 2009-10 by over 43 per cent to Rs 521.26 billion - Additional funds to tap clean energy

The government has increased the budget outlay for the power sector in 2009-10 by over 43 per cent to Rs 52,126.27 crore that may help tap electricity from clean sources. If we want to develop cleaner sources of power, we would require budgetary support for that. This additional budgetary support would help. We would look forward to efficiency in generation and demand side management,'' former Power Secretary Mr Anil Raz dan said. Compared to Rs 36,307.47 crore plan outlay for the Power Ministry for this financial year, the government has made a provision of Rs 52,126.27 crore for 2009-10 in the interim budget tabled in Lok Sabha on Friday by Finance Minister, Mr Pranab Mukherjee. The additional budgetary support is likely to give boost to companies such as Power Finance Corp and Rural Electrification Corp, engaged in financing power projects. “This additional support would help the generating companies like NTPC, NHPC and others, if this (additional support) is made available to more projects, it would bring more opportunities for us,'' PFC CMD, Mr Satnam Singh said. “This would not really impact NTPC as we are not dependent on government support, but it would give boost to other generating companies in the power sector,'' a senior NTPC official said. Is it sufficient?? No doubt , the govt has increased the budgetary allocation but this is too little.A gigantic target , to add nearly 8000MW in 11th plan seems nearly impossible , taking previous targeted addition. And in recent financial crunch where projects are not getting money from lenders, govt should have gone out of the way to support infrastructure in a huge manner and particularly for power sector. It missed a golden chance to build up infrastructure as well as creating additional jobs out of it.

India power stations 2009: Imagineering for a "Brave New World"

"When the going is tough, then the tough gets going"...is the concluding remark of Mr Chanda Roy, Director (Operations) NTPC in the eve of inaguration of International O& M Confrence at Le Meridian, New Delhi on February 13, 2009.NTPC is organising IPS-2009 ( Indian Power Stations-2009 ) to commemorate the first unit of commissioning of NTPC Singrauli power station on 13th February, 1982.

NTPC which has installed capacity of 30626MW is the largest power generation company in India. It has nearly 24oooemployees and it plans to be a 75000MW company by 2017.Its plants are highly efficient. Currently it is foraying into hydro, coal mining and renewables. It is by and large a energy integrated company. At the same time, it is having its own problems.

It is struggling with fuel issues ( Coal and Gas availability ).Due to non availability of fuel, generation was starnded which is a big loss to the nation.

Speaking on the occasion, Mr jairam Ramesh very rightly identified 3 criticalpoints .

1. Environmental issues
2. Competitive challenges
3. HR issues

NTPC is 3rd largest polluter in terms of GHG emmission , though it can take credit of being the 2nd lowest emmitter in terms of CO2 intensity (i.e) Co2 generated per MW unit generation. But it will have to face resistance from the global community as well as from our own country. There is also inherent problems of land acquisition and water availabilty. NTPC has recently started installing equipments worth 30 crores to measure CO2 emmission which is unique on its own.NTPC should focus on itigating carbon emmissins

On competitve challenges, the minister of state said that the UMPPs are getting out of the reach of NTPC besides having competitive advantages. This is vary sad. While private companies are quoting at Rs 1.70 for pit head power plants, NTPC quoting Rs 2.24 which is not done. The real competition will arise when in 2011, all the power projects will be awarded on the basis of competitive bidding and at that time it will be do or die like situation for NTPC as it will complete directly with private players. So he warned NTPC to prepare fully for the head on competition and assured that Govt will help it fully in its endevour. NTPC officials are always talking of problems with CVC when it comes to competitive bidding and blame it on the internal structure of the company and the association with BHEL for not quoting a comparable lower tariff.

Last but not the least, he highlighted the HR problems in NTPC and told that the challenge before NTPC is recruit and retain the engineering and management staffs. He even called back the NTPC top guns who shunned NTPC and joined private organisations for sake of money.Private companies are reaping benefit because of NTPC employees working there with their talent and experience.He also expressed concerns over the average age profile of NTPC employees which is around mid 40 level.

Other speakers on the dias did highlight other imporatnt issues but CEA once again reiterated that NTPC should not depend on CIL for its coal supplies. It must import coal or develop captive coal mines within time schedule so as to fulfill its targeted generation.

The CERC norms are getting tougher day by day and its a big challenge to make available the plant for 85%.

While there are challenges all around, NTPC has the strength to tackle it on its own. The aim is big and like Mr Chandan Roy said when the going is tough, the tough gets going...

Lets hope NTPC achieve its target and serve the country with its vision and mission.

ALL about CCS..Carbon Capture and Storage

http://www.mckinseyquarterly.com/What_is_carbon_capture_and_storage_2247?pagenum=1