The Ministry of Power, on February 15, released its draft guidelines to promote pumped storage hydro projects for renewable energy storage. With the increased penetration of variable renewable energy (VRE) sources or intermittent sources like solar and wind, into the grid, there has been a need to incentivise technologies to support energy storage, said the ministry.

Pumped storage projects (PSPs), often called ‘giant batteries,’ have been around for a while and are an internationally accepted technology. It is conventionally used to stabilise the grid and maintain peak power. With the seasonal variability of renewable energy production, the importance of energy storage systems like battery storage and PSPs has assumed significance. These projects store appreciable amounts of energy and release it when required. The ministry claims that this technology is a preferred choice with the rise of renewable energy.

The PSPs comprise two water reservoirs connected through a tunnel or underground pipe at different heights. When there is more electricity production and less demand, these projects pump water from the downward reservoir to the upward reservoir. When more energy is needed, water is pushed from the uphill to the downhill via a turbine to produce the required power instantly.

“Amongst the various technologies available for addressing this requirement of storage and ancillary services, Pumped Storage Projects (PSPs) are clean, megawatt-scale, domestically available, time tested, and internationally accepted. PSPs are clean, green, safe, and non-explosive. They don’t produce any poisonous/ harmful by-products or pose disposal problems. The guidelines to promote PSPs are based not only on their usefulness in maintaining grid stability and facilitating VRE integration but also on their other positive attributes compared to other available energy storage systems,” the draft guidelines said.

In its draft guidelines, the ministry has also asked states to consider exempting stamp duty and registration fees for the land for PSP projects, give government land at concessional rates for such projects, avoid double taxation, and provide relief in the State Goods and Services Tax (SGST). It has also defined a time period of two years for the project developers to start construction work, failing which can lead to the cancellation of the contract.

The norms also bat for keeping the project exempted from free electricity obligation, doing away with the need for Environmental Impact Assessment (EIA) studies and public hearings if such projects are built in existing dams or areas away from the main river water (off-the-river). The power ministry guidelines also mandated using green finance like sovereign bonds or concessional climate finance for funding such projects. Besides this, the norms discuss market reforms like fixing the appropriate tariff for power generation from PSPs. The government draft norms sought feedback from the stakeholders by the end of March 2.

Government push to expedite PSP growth

Experts working in the sector claim that several measures mentioned in the draft norm may help expedite the growth of PSPs in India and handle the bottlenecks in the sector. Ammu Susanna Jacob, a research scientist from the Center for Study of Science, Technology, and Policy (CSTEP), told Mongabay-India that the industry failed to gain much traction in the last few decades despite immense potential due to several inherent PSP issues.

“Several issues have halted the growth of PSPs in India. The higher upfront cost, the high tariff of power used to pump water uphill, and the long gestation period of such projects due to several approvals and formalities,” she said. Jacob said that the government has proposed exempting environmental clearance for many PSP projects, talked about other market reforms, and added other incentives for its promotion, which may give impetus to the sector.

“The distribution companies operate the existing PSPs on a no-profit, no-loss basis, with no incentives for the flexibility they provide to the grid. Hence, to improve the uptake of PSPs in the grid, differential pricing should be explored (instead of a flat energy charge) that will increase PSP profitability. If they have enough support, they can become more viable,” she said. She added that the government could also consider allowing Foreign Direct Investment (FDI) for PSPs as they are available for other renewable projects, besides considering generation-based incentives like other countries to increase competition and growth of the sector.

The PSP sector has yet to see much growth compared to several other countries and has been a laggard. Currently, India has around 4.7 gigawatt (GW) of installed capacity of PSPs, of which 3.3 GW is operational. Globally, China leads the PSP market with a total installed capacity of 36 GW, followed by the United States at 22 GW and Japan at 22 GW.

According to the draft Electricity Plan 2022 of the Central Electricity Authority (CEA), to accommodate the planned RE capacity addition by the end of 2031-32, India will need 18.8GW of PSP and 257.77 GW of Battery Energy Storage Systems (BESS). Some of the operational PSP plants exist in states like Telangana (Nagarjuna Sagar, Srisailam), Tamil Nadu (Kadamparai), Maharashtra (Bhira, Ghatgar), and Purulia in West Bengal.

In India, CEA figures from January 2022, say another 2.8 GW of PSPs are under construction, whereas 24 GW of such projects is under different stages of development.

Battery storage and PSPs

Somit Dasgupta, a senior visiting fellow at the International Council for Research on International Economic Relations (ICRIER), told Mongabay-India that if India wants to decarbonise the energy sector, it cannot confine itself to growing renewable energy. He said it also needs enough storage systems to capture and use clean energy when required.

“The country has yet to have a good history of its success. Currently, the price of batteries is rising and stands around Rs. 8-10 per unit (1 kilowatt-hour), and their price is dynamic depending on changing geopolitics and other reasons. PSP is a domestic and viable solution. Although it does not have the benefit of mobility like BESS, it can thrive until the costs of BESS become cost-competitive,” Dasgupta said.

A report by NITI Aayog on energy storage systems claims that although the upfront cost of PSPs is higher, its operational cost per KwH is lower than that of battery storage systems. It claimed that while the lead acid batteries can work up to 2-6 hours, PSPs can supply energy ranging from six to 20 hours. Another study by the Institute of Energy Economics and Financial Analysis (IEEFA) claimed that PSPs lose around 20-30 percent of the energy in their storage process but have a longer duration supply than battery systems. The study batted for the PSPs for battery storage, citing its smaller impact footprint like other hydro projects.

Environmental concerns

As PSPs are planned on existing hydroelectric projects, reservoirs, and off-the-river systems, there is minimal impact on the environment in the nearby areas of the project, according to the ministry draft guidelines document. The ministry has proposed exempting PSPs on old dams and off-the-river PSPs from Environmental Clearance and public hearings. It also said there was no need for any local areas development fund as the environmental impact in such cases is minimal.

However, environmental experts are wary about this proposed mandate. Himanshu Thakkar, Coordinator at the South Asia Network on Dams, Rivers and People (SANDRP), told Mongabay-India that if the government avoids environmental impact assessment and people’s informed consent for such projects, it can lead to lead to catastrophic events like the infamous incident of Joshimath and others.

“India has over 5,000 big dams, and only three percent have hydropower components. One of the best options could be using them first, ensuring the operation of existing PSPs as most are not operating in PSP mode, ensuring optimum peaking power generation from existing hydro, and then thinking of any new PSPs if viable and required,” he said.

Thakkar said that since all PSPs will have two reservoirs, submergence of land and possible forests, tunnels, turbines, approach roads, building transmission lines, staff colonies, powerhouses, and others, they will undoubtedly have adverse environmental and social impacts.

“In India, currently, we have only on-the-river PSPs. Now there are proposals for off-the-river PSPs. These projects certainly need social and environmental impact assessment. There will be extraction of water from some source, construction, likely loss of terrestrial biodiversity, and other likely threats that need scrutiny and consultations, even more so in the context of climate change,” he said.

In the past, too, several PSPs have been under the radar for their local impact. The construction of Purulia PSP in the forest areas of Ajodhya hills in the Dalma Elephant Corridor in West Bengal in 2000 also stirred controversy with reported cases of interference with elephant movement, the vanishing of local drains and creeks, and loss of local biodiversity.

Banner image: Nagarjuna Sagar dam across the Krishna river in Telangana. Photo by Sumanth K/Wikimedia Commons.

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Aditi Tandon Senior Production Editor

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