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Government Issued Guidelines To Promote Developing Pumped Storage Projects

Guidelines issued by the Ministry of Power aim to regulate and promote the development of pumped storage projects (PSP) in India. These guidelines clarify the process of allotting project sites through competitive bidding and eliminate any upfront premium for project allocation to ensure financial viability.

To make PSPs more attractive to developers and investors, the ministry has also proposed tax waivers and participation in power markets.

The development of PSPs in India is expected to be driven by various factors related to the energy transition. These projects will play a crucial role in integrating variable renewable energy sources into the energy mix, providing backup during periods of high demand, and maintaining grid stability.

According to the Central Electricity Authority (CEA), India will require 26.7 GW of pumped storage projects (PSP) and 47.2 GW of battery energy storage systems (BESS) by 2032 to integrate renewable energy capacity.


The state governments have a variety of options for how they can assign project locations to developers, including CPSU and State PSU nominations.

Governments may also opt for competitive bidding processes, tariff-based competitive bidding, or self-identified off-stream pumped storage projects, according to the rules.

Additionally, developers must begin construction within two years of the project’s allotment date, or the concerned state will rescind the project’s site allocation.

However, projects whose commencement of construction has been delayed due to pending environmental and forest clearance may be given a one-year waiver.

States must make sure that there is no upfront fee assessed for project distribution to guarantee the profitability of PSPs.

The proper regulator must make sure that grid stability-supporting services such as spinning reserves, reactive support, black starts, peaking supplies, tertiary and ramping support, faster start-up, and shutdown are properly monetized.

To send the proper pricing signals to peak and base load-generating facilities, the regulator must inform peak and off-peak tariffs for the generation.

All market sectors of the power exchange, including the high-price component of the Day Ahead Market (HP-DAM), will be open to PSPs and other storage projects. They will be able to benefit from the price difference between peak and off-peak prices as a result.

The ministry has determined that abandoned mines, especially coal mines, might be repurposed as hydro storage in several regions of the nation, making them ideal catalysts for PSP development.

In collaboration with other government stakeholders, it has started making efforts to identify and develop closed coal mines as potential PSP sites.

Advantages of Pumped Storage Projects

India’s move to a more sustainable energy system depends heavily on PSPs. PSPs can discharge excess energy during off-peak hours, boosting the load factor of other systems and supplying extra capacity during peak hours. This is possible because wind and solar energy can be produced while energy demand is low. In times of excess demand, PSPs also offer vital backup while preserving grid stability.

Without PSPs, the ministry claims that complete decarbonization of the power industry will not be possible. In comparison to battery energy storage systems, PSPs have less of an impact on the environment and are often built for longer discharge periods, making them more tolerant of grid conditions.


India has a sizable potential for on-river pumped storage, according to the CEA, with a capacity of up to 103 GW. Currently, there is one 4,745.6 MW project that is operating, four 2,780 MW projects that are under construction, and 27 projects that have been allocated by the states and are in various phases of development.

Off-river pumped storage also has a significant potential, which is now being considered.

The Ministry suggested providing pumped storage projects with financial assistance in February. These projects, which use renewable energy for charging, may be developed using sovereign green bonds issued to mobilize capital for green infrastructure.

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Source: Mercom India

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