Hydropower is slated to play a significant role in India’s push towards fossil-free energy. The sector currently accounts for 47 GW (11%) of India’s installed power capacity.

The government envisions ramping this up to 67 GW by 2031-32, as part of India’s journey to net-zero by 2070. Yet, cracks are appearing in the sector’s viability. Hydropower output plunged by 22% in the fiscal year ending March 2024, a stark reminder of the growing climate variability reshaping India’s energy landscape. Unpredictable rainfall patterns, coupled with escalating natural hazards like flash floods, have battered the infrastructure of hydropower plants (HPPs), raising alarms about the sector’s viability in an era of climate disruption.

Climate Risk Horizons’ recent study on the vulnerability of HPPs in Uttarakhand speaks to the need for caution. The growing frequency of climate-induced disasters threatens the long-term viability of many projects, particularly those located in high-risk regions. The study identifies two critical issues that require urgent attention: the need to avoid constructing HPPs in high-risk zones and the importance of finding alternative financial mechanisms to mitigate climate-related financial risks.

Hydropower Plants in High-Risk Zones

A key finding from the study is the dangerous trend of siting new and upcoming HPPs in regions that are highly susceptible to climate-induced disasters, such as floods, landslides, and glacial lake outburst floods (GLOFs). The Joshimath-Srinagar basin, identified as the most vulnerable for HPPs, exemplifies the risks of continuing to build in such high-risk zones. The Chamoli disaster of 2021, which devastated the Tapovan Vishnugad HPP, stands as a stark reminder of the catastrophic consequences of siting mega construction projects in these perilous areas. These threats apply across the unstable Himalayan region; in 2023, the Teesta III hydropower project in Sikkim suffered massive destruction as a result of floods and landslides. In all, our study identified over ₹70,000 crore worth of investment planned for 15 projects across high-risk basins in Uttarakhand alone. Continuing to develop HPPs in these zones not only puts physical assets at risk but also endangers local communities and investments made with scarce public resources.

The solution is clear: we must avoid the construction of new HPPs in high-risk zones. The study advocates for the integration of climate-induced disaster risk screening at the earliest stages of project planning and design. This proactive measure can drastically reduce future catastrophes and ensure that new HPPs are built with climate resilience at their core.

Outdated Climate Data and Planning Models

Another significant challenge is the widespread reliance on outdated climate data in planning hydropower projects. The Himalayan region’s dynamic and evolving climate conditions demand a nuanced understanding of the risks posed to hydropower infrastructure. As climate patterns become increasingly unpredictable using static and outdated data increases the vulnerability of infrastructure to unforeseen climate events. This shortfall in data leads to a lack of proper disaster mitigation measures, exacerbating the risks.

Design standards need to be updated based on the latest climate science and factor in future uncertainty caused in part by climate change. It emphasizes the importance of regular risk assessments and the implementation of multi-hazard early warning systems (MHEWS) to protect hydropower infrastructure from climate-induced disasters. Engineering solutions and innovative technologies, such as robust construction standards and glacial monitoring systems, are also proposed to improve the resilience of HPPs.

Heavy Reliance on Public Funding

One of the most striking features of the hydropower sector today is the dominance of public sector investments. This places a significant financial burden on governments, especially when projects are delayed or damaged by climate events. For instance, the Chamoli disaster alone will incur debris removal costs of over ₹3,400 crore, per our estimates. These figures do not account for additional costs related to repairs, equipment replacements, or loan escalations. As climate risk grows, the financial viability of HPPs reliant on public funds becomes increasingly precarious. The fact that private finance has almost completely withdrawn from the sector should be seen as flashing red warning as to the risk-reward ratio of many of these projects.

We need to explore alternative financial mechanisms to reduce reliance on public funds. Public-Private Partnerships (PPP), green bonds, and climate insurance are key tools to distribute financial risk more equitably across stakeholders. This approach would protect public finances while ensuring that the financial risks of climate-induced disasters are shared by private investors, insurers, and development banks.

Additionally, as we detail in our study, hydropower infrastructure must be “climate-risk proofed” from the onset, avoiding high-risk areas and incorporating adaptation measures that can withstand extreme climate events. These strategies would not only enhance the resilience of hydropower projects but also minimize long-term financial losses for project developers and governments.

India’s hydropower sector stands at a pivotal moment and its survival requires the prioritisation of climate resilience and financial sustainability. The solution lies in adopting a multi-faceted approach that avoids high-risk areas for new projects, updates design standards based on the latest climate data, and introduces alternative financial mechanisms to spread the risks. Only by addressing these challenges head-on, and not ignoring our new reality, can India’s hydropower sector continue to thrive, even in the face of escalating climate risks.