The Tamil Nadu Electricity Regulatory Commission (TNERC) has allowed the Tamil Nadu Green Energy Corporation (TNGECL) and the Tamil Nadu Power Distribution Corporation (TNPDCL) to initiate the tendering process for the development of a 1 GW closed-loop off-river pumped storage project at Velimalai in Kanyakumari district.

The Commission allowed a few deviations from the Ministry of Power’s tariff-based bidding guidelines for procuring storage capacity from pumped storage projects.

TNERC ruled that these deviations are project-specific and applicable only to the Velimalai project, while future procurements must strictly follow the bidding guidelines.

The Commission directed the petitioners to submit revised bidding documents, including the pumped storage purchase agreement (PSPA), transmission implementation agreements, and other related documents for approval after the pre-bid stage.

It also asked the petitioners to submit a commitment from the Tamil Nadu Transmission Corporation (TANTRANSCO) to complete the substation-related works in line with the project timelines.

Background

TNGECL and TNPDCL filed a petition seeking approval to float the tender for the Velimalai pumped storage project, which is part of Tamil Nadu’s strategy to strengthen grid stability and integrate greater renewable energy.

The petitioners contended that certain deviations from the Ministry of Power’s bidding guidelines were necessary to effectively implement the procurement process and attract a wider pool of developers.

TNPDCL proposed using the project to achieve multiple operational and commercial objectives, including storing surplus power during off-peak hours and scheduling discharges during peak-demand periods, providing ancillary services for grid stability, and reducing liabilities under the deviation settlement mechanism.

Among the key proposals were modifications to land arrangements, financial eligibility, equity lock-in requirements, bid security framework, and the participation of foreign investment funds.

The petitioners stated that these changes would improve bankability, investor participation, and financing flexibility.

They also submitted that similar provisions have already been adopted in other pumped storage tenders, including the one issued by Maharashtra State Electricity Distribution Company in March 2024.

Commission’s Analysis

TNERC observed that the proposed pumped storage project is important to grid reliability and the integration of renewable energy, particularly as Tamil Nadu expands its renewable energy capacity.

It noted that limited deviations from the bidding guidelines may be permitted, provided they remain consistent with the objectives of transparency and competition.

TNERC observed that the tender guidelines should permit participation by foreign investment funds. The eligibility should be expanded to permit companies, including foreign companies, alternative investment funds, and consortia, to participate as bidders, aligning with the Ministry of Power’s 100% foreign direct investment allowance for power generation under the automatic route.

It emphasized that the deviations would broaden the bidder pool, improve financing prospects, and enable smoother project implementation.

However, the Commission noted that national security provisions, financial due diligence, and regulatory alignment must be maintained, especially in cases involving foreign investment participation.

Recently, TNERC approved the procurement of 270 MW of firm and dispatchable renewable energy by TNPDCL from Solar Energy Corporation of India.

In 2024, Tamil Nadu issued the ‘Pumped Storage Policy’ to harness the potential of pumped storage 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 the project’s commissioning.

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