Madhya Pradesh has released guidelines to promote the development of pumped hydro storage (PHS) projects in the state. These guidelines clarify the methods for allotment of project sites, tax waivers, and project completion timelines.

The state has a significant potential of 11.2 GW for PSH projects, which can be further increased by developing off-river closed-loop pumped storage projects and retrofitting existing hydropower projects.

The Central Electricity Authority estimated that India will require 26.7 GW of PHS and 47.2 GW of battery energy storage systems by 2032 to integrate renewable energy capacity.

Project Identification

PHS developers or nodal agencies can identify project sites. The developers must register with Madhya Pradesh Industrial Development Corporation to be eligible for benefits under the program.

PHS project application for registration should be filed through the state’s New and Renewable Energy Department website. The developers must provide details, including estimated hydropower potential in megawatt capacity with energy-to-power ratio, reservoir availability, coordinates, land area required, and storage capacity.

The New and Renewable Energy Department will publish the feasibility of the project sites. However, submitting a proposal or registration does not grant exclusive rights to any location. The nodal agency or Madhya Pradesh Power Management Company (MPPMCL) may invite bids for power procurement from PHS projects to be set up through competitive bidding.

Mode of development

The state had identified two modes for developing the PHS projects: Mode I includes selling power to third parties or captive consumption, and Mode II is for meeting MPPMCL requirements through bidding.

PHS sites for Mode I will be allotted through competitive bidding, and MPPMCL will have the first right of refusal for up to 10% of electricity generated under this Mode.

If a pumped hydro storage project sells electricity to a third party, the rate at which MPPMCL will purchase electricity will be lower than the tariff discovered in the competitive bidding process for third-party sales or the tariff set by the Regulatory Commission.

For captive electricity use, MPPMCL will procure electricity at the tariff determined by the Commission. The developer need not pay Harit Urja Vikas Fees for the quantum of electricity procured by MPPMCL.

Under Mode II, MPPMCL will identify the long-term energy storage requirement and choose a PHS developer through competitive bidding.

Waivers

Several waivers are available for PHS projects, including exemption from electricity duty and energy development cess for ten years from the commercial operation development (COD) and a 50% waiver on wheeling charges for five years from COD.

There is also a 20% exemption on registration-cum-facilitation fees and reimbursement of 65% of stamp duty on purchasing private land for the project.

Developers can avail of carbon credits and incentives per the authorities’ guidelines or arrangement with the procurer.

Land for Mode I projects will be allotted at 100% of the circle rate with right-to-use permission. For Mode II, a discounted rate of 35% will apply.

Project timelines

Project registration must be completed within three months from the allotment. The preparation of detailed project report and obtaining clearances must be completed within two years from the project’s allotment date.

The land must be acquired within three years from the allotment date. Financial closure should be obtained within three years from the allotment. Half of civil electrical, mechanical, and hydro-mechanical works must be completed within five years of the allotment.

The project must be commissioned within six years from the allotment.

In February, the Union government proposed supporting pumped storage projects through concessional climate finance.

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