The recent decision of the government to introduce tariff based competitive bidding (TBCB) for pumped storage plants is diametrically opposite to what has been the government policy in the past as far as the hydro sector is concerned. When the government introduced the policy of competitive bidding as given in the Tariff Policy, the hydro sector (both large reservoir projects and also PSPs) was kept out since it was felt that given the element of geological surprises, it would not be possible to adopt the policy of competitive bidding. Consequently, generation tariffs for the hydro sector was to be determined by the electricity regulatory commissions though certain conditionalities were imposed on the selection of the developer, the date by when clearances should have been obtained etc. This recent policy of TBCB for the PSPs is primarily aimed at off-stream projects where chances of ecological damage are minimum. Consequently, the government has proposed streamlining the process of getting the environmental clearance which is far less tedious compared to a large reservoir project. While TBCB guidelines are the latest policy measures the government has introduced, the ball was set in motion in 2023 when the government proposed measures that need to be taken for encouraging PSPs. Apart from streamlining the process for environmental clearance, the guidelines also speak of energy storage obligations (ESO) of discoms, waiver of inter-state transmission charges till June 2025, providing budgetary support for enabling infrastructure for hydro projects including PSPs, no requirement of providing for free power etc. The government has also distributed the PSP sites amongst the power sector public sector units in 2022, to be developed in consultation with the states concerned. PSPs, incidentally have ample benefits and their services can be utilised in several ways. Apart from handling the problem of intermittency of renewable generation, they also provide ancillary services like flexible capacity, voltage support and black start operations. The storage facility offered by PSPs is better than batteries since they can provide this service usually for six hours (or more) compared to about four hours in respect of the latter. Besides, once constructed, a PSP can be utilised for about 40 to 50 years which is many times more compared to battery storage. It is no surprise therefore that 95% of the world’s storage capacity is in the form of PSPs and the total energy that can be stored is about 9 GWH. The leader is China with 30 GW of PSP storage followed by Japan (22GW) and USA (19 GW). The Central Electricity Authority (CEA) has estimated that India would need 26.7 GW of PSP capacity and 47.2 GW (5 hours) battery storage capacity by 2032. These estimates are based on certain assumptions regarding the cost of batteries and in case the cost of batteries turns out to be higher, then one would require more storage capacity in the form of PSPs. The levelized cost of grid scale battery usage come to about Rs. 7 per unit. However, there have been some cases where the cost has come down to about Rs. 5 per unit. Actually, it’s all a function of risks associated with the project involving storage. In case the government steps in and de-risks the project, then the cost of storage comes down. So, no two storage projects are comparable, just as no two solar generation projects can be compared. India, unfortunately, cannot use gas-based generation to handle intermittency issues due to low availability of domestic gas and high price of gas in international markets. Hence, the accent on PSPs and battery storage. Use of green hydrogen for storage is no more than a concept today given its intricacies. The moot point is whether we are doing enough for the promotion of PSPs. Laying down of policies easing environmental clearance and other measures is fine but what we need is handholding by the government. The government has to identify the sites, help in land acquisition, if required, assist in relief and rehabilitation measures, wherever applicable, obtain clearances from all statutory bodies, resolve interstate issues, if any, etc. To put it holistically, there has to be a sense of ownership on part of the government. Pushing the entire risk burden on private developers will not help. As it is investments in hydro projects is perceived to be risky for a number of reasons. We have seen in the case of renewable projects, both solar and wind, private developers have to bear the entire risk burden. To the extent that even their payments are not made in time and there are reports that they are forced to forgo interest payments when there are delays on the part of distribution companies (discoms). As a result, we have not added capacity to the extent we need to. We may have multiplied our renewable capacity many times over but it is far too short if we are thinking of going net-zero by 2070. The incremental capacity that is required for renewable generation from now till 2030 is at least three times of what we have actually achieved in the past. Apart from the issue of risk-sharing, there are other contributory factors which have inhibited renewable growth. The imposition of basic customs duty has made generation tariffs more expensive which hurts the cash-starved discoms. Further, the invocation of approved list of models and manufacturers (ALMM) has ensured that not enough cells/modules are available domestically and also that their quality is inferior compared to what is available in the international market. Grid connectivity is yet another issue. Mercifully, such issues should not arise in the case of PSPs since everything is available domestically and technology too, is time tested.
Finally, a few stark facts. As of today, we don’t have a single off-stream PSP in the country. We also don’t have any assessment of the potential capacity of PSPs which can come up on off-stream mode. This exercise is currently going on. So, the journey is going to be long for India before off-stream PSPs become a reality with real tangible benefits.
