Tamil Nadu has issued the Pumped Storage Projects (PSP) Policy 2024 to harness the potential of PSPs to optimize renewable energy utilization, promote sustainable energy growth, and attract public and private investments.

The policy has set timelines for various stages of execution, with seven years allowed for PSP  completion and commissioning.

While environmentally friendly, renewable energy sources present challenges due to their intermittent nature. PSPs address this variability by storing excess energy generated during low-demand periods and releasing it when the demand is high. This stabilizes the grid and enhances the overall efficiency of renewable energy use.

Objectives

The Tamil Nadu PSP Policy outlines six primary objectives aimed at enhancing the state’s renewable energy capabilities:

• Harnessing PSP Potential: The policy encourages both on-river and off-river PSP development. It incentivizes developers to propose potential sites and acknowledges the unique nature of PSPs as net electricity consumers during off-peak periods.
• Supporting Sustainable Energy Growth: PSPs are essential for grid stability and integration of renewable energy. Their environmentally sustainable development ensures that energy needs are met without compromising ecological balance.
• Meeting Renewable Purchase Obligation (RPO) Targets: PSPs contribute to meeting the Union Government’s RPO targets by efficiently storing and dispatching renewable energy, thus maximizing its utilization.
• Attracting Investments: The policy aims to create a favorable investment environment through clear regulatory frameworks, financial incentives, and streamlined approval processes. Public-private partnerships are encouraged to leverage the strengths of both sectors.
• Faster Integration of Renewable Energy into the Grid: By providing reliable storage, PSPs facilitate the quicker integration of renewable energy, thus improving grid stability and reliability.
• Job Creation: The construction, operation, and maintenance of PSPs generate direct and indirect employment opportunities, stimulating the local economy and supporting skill development programs.

Project Identification and Allocation

The Tamil Nadu Green Energy Corporation is the designated nodal agency responsible for identifying and facilitating PSPs. PSP sites will be allocated through different modes, including joint ventures with central public sector undertakings, competitive bidding processes, and public-private partnerships. Private developers are invited to identify potential locations and propose projects for off-river closed-loop PSP sites.

Incentives and Concessions

To encourage investment, PSPs are eligible for a range of incentives, including:

• 50% concession on stamp duty and registration fees
• Exemption from electricity taxes for ten years from the date of commercial operation
• Single window clearance for statutory approvals
• No water cess for PSP operations.
• PSP developers can set up captive solar or wind power plants to meet their input power needs, with energy banking facilities extended to such projects.

Land Acquisition and Water Use

The policy facilitates the acquisition of government, forest, and private land for PSPs. Developers must pay applicable water charges for the one-time filling and annual recoupment of water. The policy emphasizes minimizing water use to the minimum required for project operations.

Project Timelines and Penalties

PSP developers must adhere to specific timelines for project completion:

• Preparation of detailed project report and obtaining necessary approvals within two years of site allocation
• Start of construction within three years
• Project completion and commissioning within seven years

Failure to meet these milestones may result in the cancellation of site allocation and forfeiture of upfront payments, except in force majeure or delays in environmental and forest clearances.

Power Evacuation and Input Power

PSPs can export power to other states via State Transmission Utility or Central Transmission Utility networks. Developers are responsible for transmission charges. Developers can set up renewable energy projects or source power from outside the state for input power.

The Ministry of Power recently issued the draft tariff-based competitive bidding guidelines to procure stored energy from existing, under-construction, or new PSPs.

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