Small hydropower (SHP) plays an essential role to help access cleaner and cheaper sources of energy. Besides, the usage of water resources towards inflation-free green energy also holds spectacular operational flexibility. Despite the significant advantages associated with small hydroelectric power projects, there are adverse side effects i.e., rising climatic uncertainties, hydrological implications, financial ambiguity and irregular technological advancement that create a dilemma for investors. Although one-third of the power business in India is carried out through water-based hydropower projects, recent trends in water-based hydropower projects show significant socio-economic and environmental impacts, and which reduce the confidence of investors for further investment. The central argument in this paper revolves around identifying the prominent risk factors that undermine the confidence of investors in SHP project investment in India. The methodology used for this impact identification is based on extensive literature review, focussed expert discussions, and further validation through a primary survey among the stakeholders in the hydropower sector. The risk index (RI) was estimated using the fuzzy logic theory. Thirty-six SHP projects are analysed, and classified into various risk classes. The study identifies the six major risk factors as environmental, geological and hydrological, technical, financial, regulatory, and socio-economic. The study area risk index shows that some projects are in extreme zones, and through the suggested measures, a few of the project sites can be made viable for long term sustainable investment. A risk zone based variable insurance premium is proposed for mitigation of risks. The paper concludes by presenting the results of this research around identification, assessment and mitigation of investment risk by procuring an optimum insurance cover that reduces cost burden for investors, and provides a safety shield to the project. The paper also extends support to policymakers to create a more robust conducive environment for SHP investors.
