Ministry of Power, India - TBCB guidelines for procuring power through pumped storage projects
Commentary from Mr. Sanjay Kumar Mittal – Senior Director, Eninrac
The new guidelines are part of India’s broader strategy for energy transition, aimed at achieving energy security by shifting from fossil fuels to renewable energy sources. He noted that these guidelines are also designed to improve grid stability, particularly through the use of energy storage systems.
Mr. Mittal pointed out that the government had already issued guidelines related to Battery Energy Storage Systems (BESS) and that the latest set of guidelines focuses on energy storage systems in Pump Hydro Storage Plants (PSP). According to him, this step is crucial because, as India transitions to renewable energy, power from sources like wind and solar is intermittent and cannot provide a continuous 24/7 supply. Therefore, energy storage systems are needed to bridge the gaps during periods when renewable energy is unavailable, such as when the sun isn’t shining or the wind isn’t blowing.
He said, that the new TBCB guidelines aim to ensure transparency in the bidding process, creating a fair environment for both developers and consumers. This, he noted, would prevent delays that were common in the past, where capacity-related issues during bidding caused setbacks. He commended the Ministry of Power for improving efficiency and transparency through these guidelines.
Reflecting on past issues, Mr. Mittal recalled how power prices on exchanges soared to as high as 20 rupees per kilowatt-hour during 2021-2022, with some emergency power reaching 50 rupees per unit. In response, the Central Electricity Regulatory Commission (CERC) intervened, capping these prices and eventually reducing them to 5 rupees per unit. Mittal emphasized that while these actions were important, the underlying problem of grid instability during peak demand hours remained a concern, which energy storage systems could help address.
Mr. Mittal further highlighted that the National Electricity Policy 2023 set a target for achieving 74 gigawatts of energy storage capacity by 2031-32, with the PSP sector expected to contribute 27 gigawatts. He explained that the new TBCB guidelines were issued to support this target and ensure that PSP projects are both viable and financially sustainable.
In his commentary, Mr. Mittal explained the benefits of energy storage, such as stabilizing the grid, reducing peak demand, and lowering costs. He mentioned that the cost of energy storage systems would become more competitive and align with the price of conventional gray power, which typically ranges from 5 to 8 rupees per unit. He also emphasized that this approach would reduce the need for large capital expenditures, benefiting all stakeholders involved, including consumers, distribution companies, financial institutions, and even environmental groups concerned about carbon emissions.
Mr. Mittal pointed out that the per MW cost of developing energy storage systems is around INR 6 to 8 crore, which is comparable to the cost of new gray power capacities. He mentioned that developers could expect an internal rate of return between 11 to 14 percent, with a payback period of 12 to 15 years. This, he stated, makes energy storage a promising investment for the power industry.
In conclusion, Mr. Mittal expressed confidence that the TBCB guidelines would play a crucial role in ensuring the successful implementation of PSP projects and in helping India achieve its energy storage goals as set out in the National Electricity Policy 2023.
