Bigger Play: Pumped storage gets the attention it deserves

Pumped storage, the oldest and most mature energy storage technology, is finally receiving the necessary att­en­tion from policymakers and the power industry in India. After a long period of sta­gnation, with many projects stuck in the approval stage and no significant deployment, the segment is now attracting interest not only from the public sector but al­so from large private parties. Various new pumped storage projects (PSPs) have been announced and power procurement deals have been signed in recent months. The recent Union Budget 2023-24 also announced the development of a detailed framework for PSPs, with viability gap funding support also being considered. The increasing influx of renewable energy into the Indian grid is credited for ramping up PSP activity.

With India planning to expand its non-fossil-based energy capacity to 500 GW by 2030, PSPs are expected to play an im­portant role in maintaining grid stability. Renewable energy, especially wind and so­l­ar power, is infirm in nature owing to its resource dependency. Thus, these energy sources, though renewable, clean and aff­or­dable, can cause problems in grid management when integrated in large volum­es. They need a balancing source of po­wer to provide backup generation wh­en the resource is unavailable and thus en­sure grid stability. PSPs have been te­ch­nologically proven as an efficient and fl­exible means for storing large volumes of intermittent renewable energy. Hence, they are being sought after by discoms, transcos, commercial and industrial consumers and developers looking to provide round-the-clock (RTC) renewable energy power supply. This has led to the constr­uction of large integrated renewable en­er­gy projects (IREPs).

Apart from addressing the intermittency-related challenges of renewables, PSPs can help reduce the operational problems of thermal stations during the low load period, provide spinning reserves and regulate grid frequency. They can also provide voltage support, black start facility and other ancillary benefits. In comparison to other energy storge solutions, particularly battery-based systems, PSPs have the added advantage of a long project life of 40 years like hydropower projects and huge storage capacity. Further, they provide long duration storage of more than six hours and do not depend on expensive imports like batteries. Their efficiency is on par with or slightly lower than that of newer advanced battery systems, ranging from 70 per cent to 80 per cent, due to losses related to water pumping.

Potential for deployment

As per Central Electricity Authority (CEA), estimates India has a potential to deploy 63 PSPs with a total capacity of roughly 97 GW across different parts of the country. However, till date, only eight PSPs have been installed in the country with a total capacity of 4,746 MW. Of this, just 3,306 MW is in the pum­ped mode currently and the balance capacity is constrained due to delays in the construction of the tail reservoir or due to vibration-related issues in the system. Thus, there is a significant untapped pot­en­tial in the Indian PSP space.

As per the CEA’s generation planning stu­dies, about 6.81 GW of PSP capacity with 46.65 GWh of storage is needed by the Indian grid by 2026-27. This PSP requirement increases to 18.82 GW by 2031-32 with 135 GWh of storage. Thus, over 14 GW of capacity additions are required in the PSP segment by 2031-32. Meanwhile, the CEA projects estimated investments of Rs 786 billion in the PSP segment during the period 2022-32. These estimates consider three PSPs with a total capacity of 1.58 GW that are under active construction – THDC Limited’s 1,000 MW Tehri Stage II located in Uttarakhand, Water Resources Department of Mahara­shtra’s 80 MW Koyna Left Bank and TANGEDCO’s 500 MW Kundah pump sto­rage project Stages I, II, III and IV in Ta­mil Nadu. Along with these three PSPs, the CEA study considers 18 additional up­coming projects with a total capacity of 17.77 GW that are in preliminary stages of implementation.

Key recent projects

As anticipated, a large part of the upcoming PSP capacity is being developed by state agencies. Nonetheless, a few private sector players have also forayed into this space, announcing substantial IREPs. The foremost among these private enter­pri­ses is clean energy major Greenko, wh­i­ch has made a series of announcements in the PSP space in recent months. As per the CEA’s update on PSPs dated October 2022, the company has four projects under survey and investigation: 1,440 MW MP30 Gandhi Sagar (Madhya Pradesh), 1,260 MW Saundatti (Karnataka), 2,560 MW Sukhpura Off-Stream (Rajasthan) and 1,800 MW Shahpur (Rajasthan). Me­an­while, its 1,200 MW Pinnapuram PSP lo­cated in Andhra Pradesh is expected to be commissioned soon. This large PSP, with nine hours of storage capacity, will also have 1,000 MW of solar and 550 MW of wind capacity. The Pinnapuram IREP and other such upcoming projects are id­eal for RTC renewable power supply.

Greenko has already signed various agreements with companies for the dispatch of RTC power from its upcoming IREPs. For instance, it has entered into an arrangement with Ayana Power to collaborate on despatchable renewable energy so­l­utions for industrial and distribution co­m­panies in India, including an RTC power supply of up to 1 GW. Similarly, Jindal Ste­el and Power has collaborated with the Gr­eenko Group to supply 1,000 MW of green power for its steelmaking operations at Angul, Odisha. Further, Arcelor­Mi­tt­al and the Greenko Group have entered into a strategic partnership to construct a 975 MW RTC solar and wind project, whi­ch will be supported by Greenko’s PSP. Serentica Renewables has also entered into an agreement with the Greenko Gro­up for 1.5 GWh of PSP capacity to provide RTC rene­wable energy supply to its industrial cli­ents. Greenko also plans to use the RTC renewable power generated from th­e­se large IREPs to produce green hydrogen and green ammonia and supply the sa­me to industrial consumers. It has sign­ed an agreement with Uniper for the same.

Another large private player actively ex­ploring projects in the PSP space is JSW Energy. In April 2022, it announced its plans to develop a 900 MW PSP in Puru­lia, West Bengal. Further, in October 2022, the company signed an MoU with the Maharashtra government to build a 960 MW PSP. The company has been wor­king to secure resources for more than 6 GW of PSPs in resource-rich states.  Ad­ani Gr­een Energy, another big player in the renewable energy sector, has received approval from the Andhra Pradesh government for 3,700 MW of PSPs in four districts across the state – two in Par­vathipuram, one in YSR Kadapa, and one in Satya Sai. Going forward, more such in­vestments are expected from private players as the policy and regulatory frameworks are streamlined and adequate support mechanisms are formulated to make PSPs a more viable proposition.

Recent policy initiatives

In view of the strategic importance that PSPs hold for renewable energy integration and overall sustainable power system de­ve­lopment, a host of policy initiatives have been taken to promote the uptake of PSPs in the country. First, with the app­ro­val of the Union cabinet, PSPs have been declared as renewable sources. Second, in­terstate tra­nsmission charges have be­en waived on PSPs commissioned up to June 30, 2025. Third, energy storage obli­gation (ESO) has been notified and the pres­cri­bed ESO for 2023-24 is 1 per cent, which will increase up to 4 per cent in 2029-30. Fourth, budgetary support is be­ing provided for funding the enabling inf­ra­structure of hydropower projects and PSPs.

To give further impetus to PSPs, in Feb­ruary 2023, the Ministry of Power issued draft guidelines for PSP development ac­ross the country. These guidelines cover a range of issues and provisions related to PSP development including the allotment of project sites, charges to be paid by the developer, environmental clearances, gr­een finance, and others. Regarding the all­o­cation of projects, the state governments can directly award PSPs on a nomination basis to public sector companies. Else, projects can be allocated through two-stage competitive bidding to private developers or public sector companies. He­re, developers are first pre-qualified ba­sed on their financial strength, experience in infrastructure projects of similar size, past track record, turnover and ability to meet performance guarantees. Then, bids are invited based on quantifiable pa­ra­meters like the concession period of the project. In both these modes, nomination and two-stage competitive bidding, the respective states have the right of first re­fusal for 40 per cent of the project capacity. Further, in this case, tariffs are fixed by the appropriate regulatory commission and the developer can sell the balance PSP capacity in power markets or through bilateral contracts.

PSPs can also be allocated to developers through tariff-based competitive bidding, where bids can be made based on either composite tariff if the input power is arranged by the developer, or the tariff for converting power from off-peak to peak if the input power is arranged by the procurer of the storage capacity. To encourage the adoption of PSPs, the monetisation of ancillary services benefits like spinning reserves, reactive support, black start, peaking supply, tertiary and ramping support, and faster start-up and shutdown of these projects will be ensured.

To address cost-related issues, a benchmark cost of PSPs may be notified, based on six to eight hours of storage, for investment decisions by public sector companies. Further, only projects with a levellised cost of storage within the benchmark cost of storage will be preferred. To further encourage PSP development, concessio­nal climate finance may be provided and sovereign green bonds may be utilised for renewable energy integrated PSPs.

While these guidelines are still in the draft stage and have not yet been finalised, th­ey aim to address some of the key issues that hamper PSP development. Once ap­p­roved, they will stimulate inves­tor in­terest in this segment.


A key challenge with PSPs is that they are often considered on par with hydro power projects, when it comes to environmental impact. As a result, the environmental and forest clearance process of PSPs is quite time-taking and complex. However, as per recent PSP guidelines, PSPs do not have the same level of impact as conventional hydropower plants when constructed on existing reservoirs at on-the-river as well as off-the-river sites. More­over, PSPs re­quire minimum rehabilitation and resettlement as they do not cause the same level of displacement as conventional hydro projects.

Further, closed-loop PSP projects are now being developed, where storage system reservoirs are separated from the river systems and do not impact the existing rivers. Once water is filled in the reservoirs, the only water requirement is to make up for evaporation or seepage losses. Thus, such projects avoid impacting existing ecosystems and the associated aquatic life.

In terms of economic viability, PSPs shou­ld be viewed as consumers rather than pro­ducers of power. Therefore, they shou­ld be exempt from the requirement of supplying free power, as is the case with hy­dro projects. Additionally, the supple­m­e­­ntary benefits of PSPs should be appropriately monetised. While PSPs are considered renewable power sources, they should be given concessions comparable to those provided to other renewables.

In 2021, the Center for Study of Science, Te­chnology and Policy conducted a “Stu­dy on Pricing Mechanism for Energy Ge­ne­rated by Pumped Hydro Energy Sto­rage in India”, which identified poor recovery from the current pricing mechanism as a significant obstacle to PSP development. The report recommends adopting a differential pricing mechanism for pumping and generating modes (or peak and off-peak operations) and using the profits to recover fixed costs. It also suggests developing sp­e­cific pricing mechanisms for added benefits, such as peak load shaving and smo­othing of renewable energy.

Overall, there is substantial untapped po­tential and demand for PSPs in India, as the country strives to achieve its 2030 re­newable energy goals. With strong in­te­r­est from both PSP-based power buyers and sellers, clear regulatory frameworks and viable pricing mechanisms are req­uired to encourage adoption.

By Khushboo Goyal