Climate-related extreme weather events in Uttarakhand could potentially destroy several of the state’s planned hydropower projects, warns a recent report by think tank Climate Risk Horizons. The report is based on an assessment of climate-induced disaster risks faced by hydropower projects in Uttarakhand and evaluates the potential losses to governments and private investors. The report analyses indicators such as climate impacts, stressors, and human and geophysical parameters to climate-screen river basins in the state to identify the most vulnerable ones.

Joshimath-Srinagar basin was identified as the most vulnerable basin, followed by Tehri-Uttarkashi and Pithoragarh-Bageshwar basins. These regions have at least 15 Hydropower Projects in various stages of development, representing investment worth ₹70,150 crore that risks being destroyed or delayed by extreme weather events.

The report uses the 2021 flash floods in Chamoli district of Uttarakhand and its impact on the NTPC Tapovan Vishnugad Hydro Power Plant as a case study to estimate the financial damage that climate disasters pose to projects and, by extension, their promoters and investors. The destruction of the power plant resulted in more than four crore tonnes (approximately) of debris, the removal of which would cost around ₹3,400 crore, per the report. This estimate does not include electro-mechanical costs, repairs and maintenance, acquisition and procurement expenses, loan amount escalation over time, etc. Hence, the initial project cost of ₹2,978 crore has more than doubled due to the flash floods.

The report highlights the urgent need for robust climate resilience measures to ensure that financial investments in hydropower projects are protected from climate risks. To address these risks effectively, climate risk-proofing measures must be integrated into the planning, design, and implementation of hydropower infrastructure projects. The report provides a list of different financial instruments for different types of risk management approaches, along with potential sources of finances. By strategically combining financial instruments such as grants, bonds, insurance and guarantees, stakeholders can effectively manage and mitigate the risks associated with hydropower infrastructure investments.

“Hydropower continues to see significant financial investment, mostly from public sector funds. Without significant adaptation, the sector risks being overwhelmed by the climate crisis. We need to rethink how and where we build these projects, with resilience to future climate conditions as a top priority. Avoiding high-risk zones, incorporating climate risk-proofing strategies, and embracing innovative financial mechanisms are not just necessary steps—they are essential for all investors in the sector,” said Sagar Asapur, lead author of the report.

Full analysis at https://climateriskhorizons.com/research/Navigating-Climate-Related-Financial-Risks-Uttarakhand.pdf