Glacial lake burst & "hydro dollars" – Issue #74
Lessons Learned from Sikkim's Teesta-III Dam Disaster: How questionable dam construction decisions, shifting contracts, rising project costs, and environmental risks led to a catastrophic outcome.
The Big Picture
Chickens are coming home to roost in Sikkim.
Early last week, a glacial lake burst resulted in a large flood punching its way through the 1,200 MW Teesta-III dam at Chungthang, Sikkim.
Why did Sikkim's biggest dam break? The glacial lake was one reason. Another was the dam-builders, the state government and the union environment ministry ignoring warnings from locals – and disregarding the paucity of rainfall data – and okaying the project. Even that, however, isn’t the whole story.
The dam was built by a firm new to dam-building. In 2004, the contract to build Teesta 3 had been allocated to a consortium called Cosmos Energy – led by K L Chugh, Leighton Engineers of Australia and Muller and Associates from Germany.
This is when, like Uttarakhand and Arunachal Pradesh, Sikkim contemplated the prospect of “hydro dollars”. A few days after the contract was awarded; however, a director of Cosmos wrote to the Sikkim government asking it to change the terms of the contract. This has been reported as a ploy to replace Cosmos with another firm – Athena Projects.
Athena, as things stood, had bid against Cosmos but lost. Unlike Cosmos, it had been incorporated in 2004 itself and had no experience of dam-building. But now, as the state looked for a replacement, Athena said it had entered into a JV with Andhra Pradesh Genco, a state power utility. Other members of the consortium included L&T, ICICI Securities, PTC, IL&FS, Karvy and Halcrow. The Consortium, however, was new. It hadn’t built any project. As Current News sardonically observed in 2012: “The only electricity (Athena) would have generated would have been from the genset at its Jorbagh office during one of New Delhi’s frequent power cuts.”
And yet, with Cosmos out, it bagged the tender. Shortly thereafter, Teesta Urja Ltd. was created. At this point, another oddity. Of its 50,000 shares, 49,300 were owned by Athena. The remaining 700 were with some executives. All the other firms had mysteriously vanished from the MoA. Even the state government didn’t get its 26% share in Teesta Urja. By 18 July 2005, wrote Current News, APPL had completed a remarkable feat. “From being formed on 5 August 2004 and not having executed even a single project of any sort, APPL had included and then ejected AP Genco and L&T from its consortium and had then closed a MoU to build a 1200 MW hydropower project.”
How could it accomplish all this? Well, Athena was widely considered to be a benami firm owned, ultimately, by present Andhra CM Jagan Mohan Reddy. Construction began. Aggressive construction resulted in over-use of explosives while building the tunnels that would take water to the turbines. The result? The tunnels collapsed after an earthquake in 2011. Project cost rose from the initial Rs 5,705 crore to Rs 14,000 crore.
By this time, the project had pulled in investments from some of the biggest financial institutions in the world -- General Atlantic, Goldman Sachs, Morgan Stanley, Norwest Partners and Everstone Capital. As project costs soared, these firms wanted to exit. At this point, the government of little Sikkim bought out their shares. Think about this. A PPP project where the cash-strapped state government actually helped private players exit. “One needs to find an answer why a local Government with limited resources is forced to doll out Indian Rupees 4000 Crores when its annual budget is much lesser,” wrote CENFA.
By this time, with soaring project costs, Teesta Urja was producing power at Rs 6/unit – but managing to sell it only at Rs 3/unit. Which effectively pushed back the dam’s break-even point. Finally, despite the environmental risks, the state didn’t set up a flood warning system (more on this here). The result, it failed to respond to the flood that came last week.
What we have is the ultimate “we told you so” story. One where “hydro-criminality” comes home to roost. A dam was pushed through despite a risky location. The tender was given to a firm that was untested but politically well-connected. It built the dam, as expected, recklessly. Too many explosives were used; the spillway was smaller than needed. Last week, when the dam was swept away, the rock wall vanished but the spillways remained, resulting in questions whether the two had even been connected well.
Much of this went unscrutinised by a weak state incapable of monitoring work and enforcing standards. When cost and time overruns made the project unviable, the cash-strapped state government, however, bought out the private investors. And now, the dam is gone. The state has nothing to show for all the death, devastation and the cash it put into the project. A modern-day climate/morality/infrastructure fable, this.
PS: While on Teesta 3, read this blogpost by Himanshu Thakkar’s SANDRP. This statement by the Affected Citizens of Teesta also contains vital details on why the project was a disaster waiting to happen.
News of the week
Other news. Teesta 3 wasn’t the only dam hammered by the Teesta. So were two dams built by NHPC.
Lessons from such disasters are being learnt, not by policymakers making roads, dams and greenlighting urban real estate projects, but consumer marketing firms. “From carmaker Hyundai to skincare company Emami and PepsiCo bottling firm Varun Beverages, unseasonal showers in summers, irregular weather patterns, and diverse rainfall patterns – or climate change, in general – have started impacting the bottom line of India Inc,” reported Indian Express.
☕️🎧Tune-in!
Some lessons are percolating into economic think tanks as well. “As the union government gears up to constitute the 16th Finance Commission (FC) – the constitutional body for centre-state financial relations – experts recommend including variables related to climate change, beyond forest cover, to determine the division of tax revenue among states,” reported Mongabay.
In other news. Last week saw two fresh developments on the energy storage front. “Tamil Nadu is considering options for storing green energy during peak generation seasons to use during lean periods,” reported Business Standard. “Currently, no state in India has a comprehensive strategy for storing green energy and ensuring round-the-clock renewable energy (RE) supply.” The state is mulling a hybrid model where batteries and pumped storage plants will store excess energy from solar, wind, and other renewable sources.
This is a consequential development. For some time now, India’s atomic power establishment has been advocating a nuclear buildup, saying only nuclear can offset renewables’ intermittency. Rivals, however, say 100% renewable grids are possible. TN might have some answers to this stand-off.
While on pumped storage, Greenko is setting up a 1,920 MW pumped storage project in Neemuch, Madhya Pradesh. The firm, which has been racking up fast growth, had recently invested in Teesta 3. It, too, will take a hit.
Other news. The National Mineral Exploration Trust (NMET) has found rare minerals (and lithium) in Jharkhand’s Koderma and Giridih. Per sources, a bunch of private firms are already moving around the area, hoping to bag mining concessions. Their claim is worth investigating. Hardwired into it is a glimpse of the land grab coalescing around renewables in this country.
Elsewhere, India continued to batter its forests. “On September 12, the Ministry of Environment, Forests and Climate Change issued a letter to all states saying that Extended Reach Drilling – a form of oil and gas extraction – would be exempt from the forest clearance process,” reported Mongabay. “Extended Reach Drilling (ERD) involves digging a horizontal well at an incline that is at least twice as long in its length as it is in-depth, which allows extraction to take place at a distance from the point of digging.” This is a problem. “So far, no studies evaluating the impacts of ERD on forests have been conducted in India. According to the Wildlife Institute of India (WII), it will take three years to collect data, prepare a report and make recommendations on using this technology within forest areas. The environment ministry – the final authority on making changes to forest clearance regulation – granted the exemption, nonetheless, basing its decision on a report by the DGH that has not yet been made public.”
As this newsletter gets written, another report on how the government is greenlighting mining in Singrauli’s forests has just been published. The beneficiary there is Adani. Climate change and ecocide continue unfettered.
Climate long-reads of the week
After green-lighting oil exploration, Rishi Sunak is now erecting curbs to solar panel installations. ‘Detached from reality’: anger as Rishi Sunak plans to restrict solar panels. (Guardian)
Jharkhand’s forest communities crumble under climate change and government apathy (Morning Context)
A warming planet is creating a booming, and dangerous, disaster-restoration industry (Grist)
The Crimes Behind the Seafood You Eat (New Yorker)
India caught between Davids & Goliaths in global clean energy face-off (Business Standard)
How a Big Pharma Company Stalled a Potentially Lifesaving Vaccine in Pursuit of Bigger Profits (Propublica)
Three Charts On Ayushman Bharat’s Achievements And Shortfalls (Indiaspend)
As this newsletter gets written, Adani has jumped the gun, issuing a rebuttal to a story the FT is yet to publish. The rebuttal is worth reading as well – for its tone, if not its content.
Climate book of the week
A no brainer, this time around. Our book of the week is The Birds Have Lost Their Way: Essays on Hydropower and Climate Change Issues of Sikkim. The hyperlink goes to a PDF of the book which charts Sikkim’s fatal embrace of rampant hydel power construction.