Whalesbook
Hydropower Policy Revival on the Horizon
The Union Ministry of New and Renewable Energy (MNRE) is preparing to reintroduce a small hydropower scheme, with fresh budgetary allocations anticipated for the upcoming Union Budget 2026. This move signals a potential shift back towards harnessing smaller water resources, particularly in challenging geographical areas.
Ambitious Capacity Target and Funding
The proposed program aims to add 1.5 gigawatts (GW) of capacity, potentially doubling India's current installed hydropower capacity to 10 GW over the next decade. To facilitate this, the government is considering approximately ₹2,500 crore in viability gap funding (VGF). This financial support would cover 25-30% of project costs, with enhanced assistance for projects located in difficult terrains like hilly and northeastern states, and border districts.
Strategic Rationale for Remote Regions
Small hydropower projects, defined as those with up to 25 MW capacity, are well-suited for mountainous regions due to their run-of-the-river design, minimizing ecological impact. Officials emphasize the renewed focus on region-specific solutions and reliable renewable power for remote and border areas, where grid connectivity can be weak and solar or wind deployment is often expensive and technically difficult. Small hydro offers more stable generation compared to intermittent sources.
Historical Context and Expert Skepticism
An exclusive small hydropower policy was first introduced in 2009 and revised in 2014, but it was discontinued in 2017 due to budget constraints, project delays, and a governmental pivot towards cheaper solar and wind energy. Experts caution that small hydropower still faces structural challenges. Long gestation periods, environmental clearances, water availability issues, and seasonal variability in water flows can significantly increase timelines and costs, making projects difficult to justify against faster, cheaper renewable alternatives. While complementary, small hydro is not seen as a primary driver of India's energy targets.
Path Forward and Potential
The proposal has received clearance from the Expenditure Finance Committee and awaits further governmental approvals. Experts note that even with challenges, small hydro can provide crucial system support and enhance grid flexibility, especially when integrated with pumped storage projects. India currently has about 5 GW of installed small hydropower capacity, with an estimated potential of over 21 GW, suggesting significant untapped resources.