The Government of India's National Electricity Plan aims to increase pumped storage hydropower capacity to 27 gigawatts by 2032, necessitating an investment exceeding Rs 1.6 lakh crore based on prevailing capital costs, according to ICRA Research.
Recognising its importance, Finance Minister Nirmala Sitharaman highlighted the forthcoming policy in the budget to promote pumped storage projects for effective electricity storage.
A study by NDTV Profit Research estimated the cost per megawatt at around Rs 6 crore, and given the capacity under survey and investigation currently, it could warrant a capital expenditure of Rs 3.35 lakh crore.
Pumped Storage Hydropower: How It Works
The PSP Hydro system operates with two reservoirs positioned at varying heights. During times of low electricity demand and surplus power generation, the system uses electricity by pumping water from the lower reservoir to the higher one. When electricity demand increases, water stored in the upper reservoir is released downhill to the turbines to generate electricity.
Current Capacity And Potential Capex
The potential for on-river pumped storage hydro is 103 gigawatts, according to the electricity regulator, the Central Electricity Authority. As of May 2024, the country's pumped storage hydropower capacity is 4.74 gigawatts, with another 4.13 gigawatts under construction; that is, the total estimated capex is around Rs 24,780 crore. Currently, 55.93 gigawatts of capacity are under review by the regulator.
JSW Energy Ltd. projects a 16 GW energy storage need by fiscal 2027, with 7-8 GW expected to come from pumped storage systems, highlighting significant near-term opportunities.
Key Players
The key publicly listed players in the pumped storage hydropower space include Adani Green Energy Ltd., Tata Power Co., NHPC Ltd., SJVN Ltd., and JSW Energy Ltd.
Adani Green Energy has more than 5 gigawatts of pumped storage hydropower sites secured as of the first quarter of fiscal 2025. The company plans to increase this segment's contribution to its resource mix from nil to 11% by 2030.
Tata Power has signed a memorandum of understanding for pumped hydro projects of 2.8 gigawatts. The company has guided a capex of Rs 60,000–71,000 crore till fiscal 2027. Of which, 42%, or over Rs 25,000 crore, will be allocated to renewable energy, with 18%, or over Rs 4,536 crore, specifically for pumped hydro projects.
NHPC has signed a memorandum of understanding with the Maharashtra Department of Energy to develop four pumped storage projects totaling 7,350 MW. Currently, three of these projects are in the pre-feasibility stage. NHPC will not allocate capex for this segment in fiscal 2025 as it is finalising the detailed project report for its first PSP Hydro project.
Finance Director Rajendra Prasad Goyal stated in 2023 that NHPC plans to invest Rs 1.4 to 1.76 lakh crore to develop 20,000–22,000 MW of pumped hydropower storage across India over the next few years, with an expected capex of Rs 7-8 crore per MW. The company aims to begin groundwork on 3–4 projects totaling 5,000–6,000 MW within the next two years, with commissioning targeted for fiscal 2030.
JSW Energy's Strategy 2.0 aims to increase its energy storage capacity to 40 GW and its power generation capacity to 20 GW by 2030. In fiscal 2024, the company secured resources for 12.3 GW of hydro storage projects, equating to 79.5 GW. Furthermore, to achieve these goals, JSW Energy plans to invest Rs 1.15 lakh crore. While the specific amount for pumped storage hydro is not detailed, the company does acknowledge the critical need for energy storage in India.
SJVN has also received a letter of intent from Mizoram's government for the allotment of the Darzo Lui Pumped Storage Project. The project will have an installed capacity of 2,400 MW. The project's estimated cost is Rs 13,947.50 crore, bringing the capital cost per megawatt to Rs 5.8 crore. We expect to complete the project in 72 months.
Benefits
India has recognised pumped storage hydropower and battery energy storage systems, or BESS, to meet its energy storage needs.
When compared to BESS projects, PSP Hydro has lower capital costs, a higher project life, no replacement capex, a lower cost of storage per unit as well as longer storage costs.
Risks
There are, however, certain risks or drawbacks pertaining to PSP Hydro projects when compared to battery energy storage systems. These projects do require maintenance capex and have a longer execution timeline, with an accompanying risk of construction delay.
In terms of execution, PSP hydro projects also have higher execution risks, given the complexities involved in constructing the upper and lower reservoirs required for the system.
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