The Ministry of Power has issued tariff-based competitive bidding guidelines for procuring stored energy from existing, under-construction, or new Pumped Storage Projects (PSP). As per the National Electricity Plan 2023, India will require 74 GW/411 GWh of energy storage systems by 2031-32, including 27 GW/175 GWh from PSP and 47 GW/236 GWh from Battery Energy Storage Systems (BESS). The procurement process is divided into two modes: Mode 1 involves developing PSPs on sites identified by the procurer, operating on a build-own-operate-transfer model for 25 to 40 years, while Mode 2 allows procurement from PSPs either identified by the bidder or already commissioned, operating on a Build-Own-Operate basis for 15 to 40 years.
For Mode 1, the procurer must set up a special purpose vehicle to handle pre-feasibility requirements, including securing environmental, forest, and land clearances, which will later be transferred to the successful bidder. Mode 2 requires PSP developers to secure all necessary clearances independently before starting construction. The bidding process includes technical and financial evaluations, with minimum bid capacities of 50 MW for Inter-State Transmission System projects and 10 MW for Intra-State Transmission System projects.
According to the eligibility criteria, applicants must demonstrate experience in developing infrastructure projects over the past five years, meeting capital expenditure thresholds specified in the request for selection. Financial eligibility requires a net worth or investible funds of at least 20 per cent of the estimated PSP capital cost. Money deposit is set at 2 per cent of the estimated capital cost, while the performance bank guarantee is set at 5 per cent. Upon selection, the procurer and the bidder will sign a power purchase agreement, and if an intermediary procurer is involved, it will sign a power sale agreement to ensure back-to-back contracting of stored energy.
The procurer must disclose the successful bidders and their tariffs on its website for at least 30 days, and tariff adoption must be sought from the appropriate Commission within 30 days of issuing the Letter of Award (LoA). The Commission is required to adopt the tariff within 60 days; if delayed, the procurer may extend the financial closure and supply commencement dates accordingly. If the PPA is not signed within six months of the LOA, the awarded capacity will be cancelled unless an extension is agreed upon.
The developer is responsible for obtaining transmission connectivity to the ISTS network under general network access regulations. Additionally, force majeure events must be reported to the procurer within 15 days, with a response required within the same timeframe. The financial closure period is 12 months, with extension charges of Rs 1,000 per MW per day of delay. A minimum of 50 per cent of the project capacity or 50 MW, whichever is lower, must be commissioned before the project is considered operational.
Compensation provisions apply if the procurer fails to procure energy storage due to transmission constraints or grid security issues. Under the tolling tariff model, developers will be compensated for reduced off-take if the annual availability falls below normative levels. In the composite tariff model, payments for reduced energy supply will be capped at 60 per cent of the composite tariff in the PPA. Additionally, developers must offer unused capacity or energy under the Late Payment Surcharge (LPS) Rules, with profits from un-requisitioned energy sales shared per LPS regulations.
