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Invest in Hydro

You can download these two presentations to further your understanding of hydro power projects:
Or get in touch with us on info@scg-india.com

How is power generated from water in hydro projects?

Typically a hydro turbine converts Kinetic or Potential energy of water into mechanical energy. This mechanical energy is converted into electrical energy by a generator. Run-of-river hydro power projects convert the difference in the potential energy of water between a higher elevation (intake/ Forebay) and a lower elevation (powerhouse) into electrical energy. This difference in the elevation is called as the head (measured in meters), and the power generated is directly proportional to the head. The power generated is directly proportional to the quantum of water flowing through the turbine, which is called as Flow (measured in Cumecs or cubic meters/second). Typical power equation can be written as:   Power (KW) = Efficiency x 9.81 x Head (m) x Flow (cumecs)

What are the advantages of hydro power over other renewable energy technologies?

Hydro power is a renewable energy (also called green or clean energy) source and offers the following advantages over other renewable energy technologies:
–    Hydro Power is Clean energy at affordable tariffs as compared to Solar Power
–    Free dependable fuel & dependable power. Power generation is more predictable based on the flow data of previous years.
–    Better PLF as compared to solar & wind
–    Proven & standard technology at much lower costs
–    Base load generation

Why invest in hydro power projects?

–    Assured high returns over a medium to long investment period
–    High price of non-solar REC with protection of floor price (1500 Rs/MWh) and upside potential
–    No market risk for product – long term PPA provides guaranteed off-take and price
–    High demand for power in the country
–    Lower capital costs and investment as compared to Solar Power
–    Higher PLF; more predictable generation
–    Proven and standard technology without risks of obsolescence

What are the key steps in developing a hydro power project?

A small (up to 25 MW) hydro power project has a development and construction period of 5 – 7 years. The following key milestones need to be achieved (with indicative timelines in brackets):
–    Feasibility studies (3-4 months)
–    Survey and investigation; Detailed project report (DPR) preparation (1-2 years)
–    Permits and Clearances – NoCs from various Government agencies (1-2 years)
–    Land identification and acquisition (6-8 months)
–    Design and engineering (12 months+)
–    IA, PPA (3-4 months)
–    Registration under REC mechanism/ CDM benefits if applicable (6 months)
–    Tendering for equipment and selection of contractors (Civil and E&M) (6 months)
–    Financial closure (4-6 months)
–    Construction (2-4 years depending on size of project)
–    Testing and Commissioning (2-3 months)
–    Operations and Maintenance (Ongoing during operation of plant)
Some of the above activities can be on simultaneously so as to compress the development timelines.

What is the typical investment required in a hydro power project?

As a thumb rule, hydro power projects cost Rs. 7.5 – 8.5 Crore/ MW, depending up on site characteristics, equipment type etc. Banks and financial institutions offer up to 70% loans for completion of projects, which leaves an equity requirement of around 30%. This works out to Rs. 2.2 – 2.5 Crore per MW of equity funds to be invested by the promoters. E.g. a typical 5 MW project will cost Rs. 40 Crore, with a bank loan of Rs. 28 Crore, and equity of Rs. 12 Crores. These are indicative figures and are based on 2012 cost estimates. Actual costs may vary from project to project.

Are opportunities available to invest in hydro power projects?

Opportunities are available both in India and abroad. Please get in touch with us with your profile, investment quantum and preferences on info@scg-india.com.

What kind of return can I expect from an investment in hydro power projects?

Investment in hydro power projects has a medium to long gestation period (8-10 years) and there are risks involved in development and implementation of the project. Once commissioned, the project offers assured and regular returns that are guaranteed by a long term power purchase agreement. With the successful implementation of the REC mechanism, the returns from hydro power projects will receive a further boost. Currently, an early stage investor in a hydro project can expect an IRR of around 20% – 24% over an investment period of 10 years.