Pump storage 1-0-1 in Indian utilities sector: IIFL Capital Services

12 Jun 2023 , 10:48 AM

Pump Storage Hydro Plants (PSHP) are fast gaining prominence in Indian power sector; through this note analysts of IIFL Capital Services cover the basics of PSHP such as its scope, revenue model, its policy framework, which companies are pursuing it etc. As per CEA India needs to scale up capacity of PSHP from 5GW to 27GW by 2032. Players like Greenko, JSWE, NHPC, TPW etc have shown interest in PSHP; in all >20GW MoUs are already signed. Identification of site holds key for the economics and success of these relatively less complex storage projects; as such Govt policies are favourable.

Need for PSHPs in India: 

India has ~5GW operational PSHP (NHPC, TPWR etc); as Power demand grows, CEA estimates this to rise ~27GW by 2032 (potential: 119GW). PSHP operate by channelling water between the lower and upper reservoirs, to store and generate electricity; these enable active load management during periods of high demand and improve grid stability; as such PSHPs are a rapid-response back-up source and are essential for RE integration to the grid.

Understanding the revenue model: 

PSHPs can either generate revenue under the leasing model (allowing for storage/release of capacity at specific intervals), generator model (HEPP stores excess power generated and supplies the same during peak periods), or RTC model (assisting in bundling of power from RE sourcing to ensure round-the clock supply). Government wants to attract private investments through monetisation of ancillary services, tax breaks, concessions, etc.

Players engaged in PSHP development: 

Private players and PSUs are actively participating in the development of Pump-Storage technology. Players like Greenko, JSW etc are exploring plans to set up PSHPs under the leasing model and bundling their RE-RTC contracts. NTPC, NHPC and NHDC have active plans to venture into Pump Storage as well. TPW and NHPC have recently signed MoUs for establishing PSHP of 5.7GW/7.3GW respectively; while JSWE awaits EC/FC for its 10.8GW signed MoUs. NTPC is also assessing the feasibility of PSHPs at 9 sites. On seamless execution, as tariffs are reasonable, developers can earn 14-18% ROEs.