Govt To Reduce Availability Factor For Hydel Projects

The power ministry has decided to reduce the availability factor for hydro power projects from 90 per cent to 87.5 per cent. A notification to this effect would soon be issued by the ministry.

Availability factor is indicative of the capacity that can be used on demand.

The lowering of the availability factor will increase the profitability of the hydro power developers.

Earlier, the developers were to get a 16 per cent return on equity at 90 per cent availability plus a 0.7 per cent return on every percentage increase in availability above 90 per cent.

The reduction in the availability factor to 87.5 per cent will imply that developers get a 16 per cent return at 87.5 per cent availability and a 0.7 per cent return on every percentage increase in availability above 87.5 per cent.

 

This implies that if a hydel station is operating at 95 per cent availability, its return on equity would be 22 per cent against 19.5 per cent in the earlier case.

The reduction in the normative level stems from studies carried out by the Central Electricity Authority (CEA), which found the average availability for hydro power station in the country to be 87.5 per cent.

The normative level for hydro-power plants is the level at which capacity charges can be recovered completely.

Tariff for hydro stations are calculated on a two-part tariff basis.

The first part consists of capacity charge which recovers the financing charges based on the repayment schedule, interest on outstanding loan and depreciation charges.

The second part is the energy charge, which recovers operation and maintenance expenses and insurance, in addition to return on equity. It also includes variable charges like cess and energy charges for pumped storage.

These are calculated on 90 per cent dependability of the plant achieving the normative level as operations of hydro stations depend on rains.

A back of the book calculation shows that the developer would get an additional 16 crore for a 500 mw hydel station operating at 95 per cent availability.