46262 noTE no. 41 ­ Aug. 2008GRIDLINES Sharing knowledge, experiences, and innovations in public-private partnerships in infrastructure Taking a holistic approach to planning and developing hydropower Lessons from two river basin case studies in India Michael Haney and Judith Plummer P lanning for hydropower development hydropower potential, with less than 3,000 mega- needs to evolve from a project-based watts developed. engineering approach to a more holis- tic one--an approach incorporating river basin Both states are pursuing an untried and thus some- planning and integrating potential social and what risky strategy of attracting public and private environmental issues across multiple projects developers to build and operate hydropower proj- and the entire river basin. Such a framework ects. A few projects are operating today--five on would help to optimize the benefits and mini- the Satluj River, in Himachal Pradesh, and one mize the costs. It would also bring stakehold- on the Alaknanda River, in Uttarakhand (table ers together to weigh opportunities and risks 1). The hydropower development plans for the and form a consensus for sustainable and two rivers call for a total of 50 projects, adding equitable development. A PPIAF-funded study about 15,000 megawatts of capacity. Slightly on two river basins in India's Himalayan region less than half the projects have been allocated to outlines steps for moving toward such a holis- the private sector; the rest have been distributed tic framework. among state and central government hydropower companies. The chronic shortage of electricity supply in India impedes economic development and poverty These are significant development programs that reduction. More than 40 percent of households, face considerable challenges in ensuring effective most of them in rural areas, lack access to electric- coordination and efficient development and oper- ity. With the aim of extending access to electricity ation. Many of the private developers are new to to all households by 2012, the government has the sector, and their ability to manage the hydro- launched a program to add 100,000 megawatts logical, geological, construction, and commercial of generating capacity. Recognizing that meeting risks of the sector is still untested. much of this need with hydropower, a renew- able energy resource, offers many advantages, the government calls for its expansion from 24 How the project approach falls short percent of the country's generation capacity today to almost 40 percent by 2012. Planning for hydropower development has tradi- tionally been oriented toward individual projects. With this national development objective in There are compelling reasons for a project- mind, Himachal Pradesh and Uttarakhand, two based approach. But this approach has several states in northern India, have launched ambitious programs to harness their substantial hydropower potential. Himachal Pradesh has identified more Michael Haney, senior energy specialist, and Judith than 20,000 megawatts of hydropower poten- Plummer, senior financial analyst, are both members of tial, with less than 7,000 megawatts developed. PUBLIC-PRIVATE INFRASTRUCTURE ADVISORY FACILITY the South Asia Energy Team of the World Bank working on Uttarakhand has nearly 15,000 megawatts of hydropower projects in India and Nepal. Helping to eliminate poverty and achieve sustainable development through public-private partnerships in infrastructure PUBLIC-PRIVATE INFRASTRUCTURE ADVISORY FACILITY TABlE 1 Satluj and Alaknanda River projects by development stage and type of developer Central government Development State and central-state Private Total stage government joint ventures developers projects Satluj River projects Operating 1 3 1 5 Under construction 2 2 1 5 Under development 2 2 5 9 To be allocated 0 0 9 9 All planned projects 5 7 16 28 Planned capacity (megawatts) 780 6,387 3,555 10,722 Alaknanda River projects Operating 0 0 1 1 Under construction 0 1 1 2 Under development 6 7 4 17 To be allocated 0 0 2 2 All planned projects 6 8 8 22 Planned capacity (megawatts) 853 1,771 1,367 3,991 Source: Hydro Tasmania Consulting. 2007. "River Basin Development Optimization Study." Report prepared with support from PPIAF for the World Bank, South Asia Energy Team, Washington, DC. limitations for sustainable development of an Steps toward a basinwide approach entire river basin. The system governing hydropower development in An important one is its failure to take account of India today does not capture all the potential costs the power-system-wide implications of developing and benefits of developing multiple projects in a Basinwide multiple generation projects on the same river. single river basin. Using the Satluj and Alaknanda The capacity of a project to meet peak demand planning can Rivers as case studies, a PPIAF-funded study could potentially be compromised by other peak- develops recommendations for moving toward a lead to more load projects subsequently developed on the same holistic, river-basin-wide approach to hydropower river. And the development of a new project could equitably create unexpected costs or, conversely, unexpected planning, design, and operation (Hydro Tasma- nia Consulting 2007). The recommendations are shared benefits for existing projects, such as by increasing or reducing the level of silt in the water. based on analysis of project documents, planning benefits procedures, technical norms, hydrological model- Another limitation relates to assessing impacts. ing, and consultations with stakeholders. The While the project-based approach entails an guiding principle is to support improvement in assessment of environmental and social impacts existing practices rather than introduce entirely stemming directly from the individual project, new systems and approaches, which may have other impacts may emerge--or may emerge in time and cost implications. The following sections a more severe form--only when the entire river outline some of the recommendations. basin is taken as the unit of analysis. One example is the cumulative impact of multiple projects on Enhance coordination and data sharing soil erosion. Successful implementation of the river basin approach will require close coordination among In addition, there are long-term planning concerns all stakeholders--from the project planning stage that typically fall outside the scope of an individual to the evacuation of power. In addition, efficiency project. An example is the vulnerability of the river and long-term sustainability in the development of basin and related ecosystems to climate change, the rivers for hydropower generation will require which could adversely affect a river's hydrological easy, uniform access to data on meteorology, patterns and volume of water flows, the length and hydrology, topography, ecology, and sedimenta- intensity of the monsoon season, or the frequency tion. Such coordination and data enhancement and severity of floods. could be achieved by: Taking a holistic approach to planning and developing hydropower · Pursuing cooperative development of tools and better estimates of these flows is critical, especially databases to bring basinwide considerations for the run-of-river schemes. into project planning, design, and implementa- tion. This process could be formalized through Second, yield calculations do not consider either a central agency or independent body for main- upstream or downstream effects of water storage taining data integrity. or operating rules. And third, yield calculations tend to use data from just one year (a 90 percent · Establishing a developers' forum with strong dependable year). But the data from a single year Involving participatory requirements and supporting could be highly skewed, depending on the size of mechanisms for data sharing and joint decision flows in the snow melt and monsoon seasons, lead- local making. ing to unreliable estimates of the water yield and representatives thus energy output. · Assigning program responsibility and funding to in early a lead agency to facilitate river basin planning Estimates of the energy output of a run-of-river planning can and development. project should, at a minimum, consider power projects immediately upstream, since the timing build trust · In the long term, setting up an institution of water flows from these upstream sites may empowered to establish representative member- dictate the timing of energy output at the down- ship and assume responsibility for river basin stream site. At the basinwide level it is important planning. to consider the firming of seasonal river flows by optimized release from major upstream storage Optimize production basin wide facilities, which can increase the output from indi- Electricity generation is generally optimized on vidual power projects as well as the basin as a the basis of individual projects, without taking whole. into account other projects in the cascade. This can lead to substantially lower energy output and Hydrological yield estimation can be vastly project revenues than would have been achieved improved through coordinated collection of hydro- with basin optimization. With a cascade of gener- logical and meteorological data and dissemination ators, the total energy output can be increased of those data to developers. Similarly, central stud- by optimizing the scheduling of successive genera- ies could estimate the effects of climate change, an tors as the peak river flows progress downstream. important aspect that individual developers are Using mathematical modeling, the case study likely to ignore. shows that optimizing the operation of two adjacent projects on the Alaknanda as a cascade Develop shared infrastructure (rather than the planned individual operation) Greater coordination in developing infrastructure would be likely to increase annual energy output such as access roads, power for construction, and by 230 gigawatt-hours, currently valued at some transmission lines for power evacuation could $14.5 million. help developers discover potential synergies. This would lower overall costs by reducing duplication Moreover, developing a basinwide hydrological between projects and allowing developers to pool simulation model would help in understanding costs. It would also reduce environmental impacts. the effects of one project in a cascade on another. An appropriate forum could bring the developers That would reduce project risks, encourage plan- together to discuss infrastructure needs and reach ning and operation on a broader scale, and allow a consensus on how to proceed. planners and developers to understand how changes to one project might affect others in the Address sedimentation and system. water quality Like all Himalayan rivers, the Satluj and Alaknanda Improve yield estimation carry very high sedimentation loads. These create The data collection methods now being used to severe operating and environmental problems, determine hydropower output in project design including erosion of turbine runners, adverse are inadequate. First, only local, on-site data are effects on water quality, and loss of storage area considered in deriving water yields. Even though due to siltation. As the number of projects grows, a significant part of both basins is covered by snow sedimentation is likely to increase as a result of and glaciers, yield estimates from these areas are construction spoils and soil erosion. An upstream rarely given close consideration. But because the storage facility in each river basin could, by regu- runoff from these areas is highly seasonal, including lating overall flow, reduce silt loads downstream as well as lead to greater energy output. In addi- projects and sites--the combination resulting in tion, a holistic, basinwide approach would provide the greatest benefit for the least impact. It also opportunities for developing catchment protection helps identify the best combination of a range of measures such as revegetation and land stabiliza- benefits through multipurpose projects. And it tion--thus improving the overall water quality. helps achieve greater certainty in defining proj- ect requirements as well as greater acceptance of Strengthen flood risk assessment those requirements by all stakeholders. Prescribed methods for estimating extreme floods in the basins (for the purposes of project planning Involving local representatives in early basinwide and design) are not always consistently adapted planning, and ensuring good communication about and applied. The guidelines do not necessarily the planning process, can build trust and under- account for circumstances specific to the area, such standing among all those involved. Moreover, local as the flood runoff caused by extreme monsoon representatives can be involved in ways that go rains falling on snow-covered areas. Nor does it beyond participation in planning. For example, appear that any of the project developers have they could participate in monitoring the imple- considered the combined probability of reservoir mentation of environmental management plans, failure in a cascade of dams within a river basin. catchment area treatment plans, and other plans Thus both the methods of assessing the level and to mitigate the social and environmental impacts risk of floods and the application of these methods of development. need improvement. A basinwide flood forecasting and warning system Conclusion would be useful to ensure that all downstream power projects and local towns and villages Comprehensive river basin planning is a major receive adequate warning in the event of a flood undertaking. Establishing a baseline and devel- or upstream dam break. Developing such a system oping the necessary skills, tools, guidelines, and is beyond the capacity of any individual developer operating framework could take several years, but and should be coordinated by state and central this work could be completed in phases. Undertak- agencies. This effort would require upgrading ing basinwide economic, social, and environmental remote data-gathering sites, strengthening telem- assessments as well as basinwide yield estimations etry communications, and developing a central would be important initial steps. database and data processing capacity. There have been some positive recent develop- Assess cumulative impacts ments for the move toward river basin planning. A basinwide approach to assessing environmental Stakeholders have shown strong support for coordi- and social impacts at the planning stage would help nated data collection and analysis and are actively identify opportunities for maximizing benefits and considering the role of an independent river basin mitigating or compensating for risks, leading to development authority. In addition, developers and better outcomes for all those involved. The over- state governments have undertaken recent efforts all impact of developing multiple projects can be to optimize hydropower projects along limited assessed through a process of cumulative impact stretches of the Satluj and Alaknanda Rivers. But assessment. Such a process would include while encouraging, these efforts underscore the analyzing current data, determining poten- need for a more systematic approach to basinwide GRIDLINES tial impacts and benefits, considering optimization, to ensure benefits for all developers, alternatives and cumulative effects, communities, and governments involved. Gridlines share emerging knowledge and developing avoidance, mitiga- on public-private partnership and give an tion, or compensatory activities to overview of a wide selection of projects from Reference various regions of the world. Past notes can be minimize the overall impact. Hydro Tasmania Consulting. 2007. "River Basin Development found at www.ppiaf.org/gridlines. Gridlines are a Optimization Study." Report prepared for the World Bank with publication of PPIAF (Public-Private Infrastructure This process helps in selecting PUBLIC-PRIVATE INFRASTRUCTURE ADVISORY FACILITY support from PPIAF. Advisory Facility), a multidonor technical assistance the optimum combination of facility. Through technical assistance and knowledge dissemination PPIAF supports the efforts of policy makers, nongovernmental organizations, research institutions, and others in designing and implementing strategies to tap the full potential of private involvement in c/o The World Bank, 1818 H St., N.W., Washington, DC 20433, USA infrastructure. The views are those of the authors and do PHOnE(+1) 202 458 5588 FAX(+1) 202 522 7466 not necessarily reflect the views or the policy of PPIAF, PUBLIC-PRIVATE INFRASTRUCTURE ADVISORY FACILITY gEnERAl EMAIlppiaf@ppiaf.orgwEB www.ppiaf.org the World Bank, or any other affiliated organization.