By Ajay Shankar

The share of solar and wind power in electricity in India is over 10 percent and is rising rapidly. Solar power now leads in the growth of renewables. As a result, India needs to create grid storage capacity for grid stability, use of stored solar power for supply at night and to fully absorb inflexible renewable power generation. The Central Electricity Authority (CEA) has estimated that we need 74GW of storage by 2032. This is certainly challenging.

Hydro Pump Storage Plants (PSPs) are a mature technology of the last century for large-scale storage. It is estimated that we have a PSP potential of 119 GW on our river systems, more than adequate to take care of the storage needs over the next decade. In an existing hydropower project, a reservoir is created at the bottom of the existing dam from which water is pumped up using electricity, and this water is allowed to fall to generate electricity when needed. In addition, off-river PSPs can be developed in hilly terrain in a closed loop system by creating two reservoirs at different heights; water would be pumped up from the lower reservoir using electricity and when needed water from the upper reservoir would be allowed to fall to the lower reservoir to generate hydropower. The off-river PSP potential is usually quite large. The Ministry of Power has issued guidelines for developing PSPs and the CEA has made its clearance process speedier. The number of projects under development is rising.

The pace of development can be further accelerated if the central and state governments assumed a greater role. The UMPPs (Ultra Mega Power Projects) of the Power Ministry provide a good precedent of how risks can be reduced. As a result, the tariff of the successful bidder in the tender process was far lower than expected. Risk from the uncertainties regarding land and environment clearance were removed by obtaining these for the project SPV (Special Purpose Vehicle) before inviting bids. These initial project development costs were incurred by the Power Finance Corporation (PFC) and later recovered from the successful bidders. Using the same approach, for the PSP at the site of a hydro power plant, project details in terms of feasible hours of storage and MW may be firmed up, land assembly completed, CEA and Environment Clearances obtained and then bids be invited for developing the project. These costs may be incurred by the government agency promoting the project and then subsequently recovered from the successful bidder who would develop the project.

Designing the tender with the bid parameter offers two alternative approaches. The first is a straightforward extension of the existing pattern of inviting bids in which the tender is for the supply of electricity. For a PSP this would mean that the project developer would have to arrange for the electricity needed for pumping up the water. This implies that he must create or contract for the electricity needed for pumping. The demand for stored electricity would vary across days, seasons and the life of the contract. If the bid stipulates that only renewable energy needs to be stored so that electricity supplied by the PSP is renewable, then the project developer has to make arrangements for secure supply of renewables. The bidder needs to be confident of being able to do so before bidding. Solar power needs land. These factors increase risk, and this would get reflected in the bid price.

There is an alternative approach which would reduce risks and result in lower prices. This would be to invite bids for creating and maintaining the contracted capacity of the PSP. The PSP capacity may be contracted by a Discom (Distribution Company). The Discom would, depending on its needs, supply electricity to the PSP for pumping when convenient and take back the stored electricity when needed. For the PSP developer risk mitigation is complete; he becomes akin to a Transmission Line provider who has to ensure contracted availability. This fits in neatly with the latest guidelines of the Power Ministry for Resource Adequacy Planning by Discoms and creation of storage. The Discoms would provide electricity from the multiple sources that they buy from. As the share of renewables in the electricity being procured by the Discoms rises so would their share in the stored electricity that Discoms would use. This is the more economical option. It is, therefore, preferable.

For off-river closed-loop PSPs a different approach would be needed. With satellite imagery potential sites may be identified. This should be done with public money. The services of an external international agency with the requisite expertise may be required. Drones may be needed for a more detailed mapping of the identified sites. This information should be made available for a fee to all potential developers. The capacity that can be put up in off-river closed-loop projects is site-specific. Competitive bidding would be feasible only if the bid did not specify the size of the plant and the bid parameter was made the per unit tariff or the per MW capacity. Contracting for capacity would be more economical. As the potential bidder needs to choose the site, work out project details and costs and then be in a position to give a competitive bid, the time for submitting bids needs to be more, say, six months after data from satellite imagery of potential sites is made available. The time needed to bid is best settled with potential bidders.

We need to create storage rapidly. It would be desirable to undertake preparatory work with public money and then do competitive bidding repeatedly, increasing quantities as has been done in the Solar Mission. The decline in costs of solar power turned out to be far larger than expected. It would be reasonable to expect similar success in PSPs with the fostering of a competitive industry structure driving down costs.  The creation of the storage capacities needed would become feasible.

The author is a Distinguished Fellow at The Energy and Resources Institute (TERI), and former Secretary, Department of Industrial Policy and Promotion, Government of India.

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