Pumped hydro storage needs $20 billion investment in India: Study

Pumped hydro storage (PHS) can play a key role in powering low-carbon electricity in India. Tapping into the PHS sector’s enormous potential needs at least $20 billion investments annually, says a research by the Institute for Energy Economics & Financial Analysis (IEEFA).

Plans are afoot for India to be the global leader in PHS. According to the IEEFA report, some 2.6 Gw of PHS is already operational in the country and another 3.2 Gw of projects is under construction. An additional 8.9 Gw is in the drawing board stage. Development of PHS, though, comes with a caveat- the attendant problems like enormous social costs and the absence of a strong policy signal for producers and consumers.

“There are a number of reasons for the delay in PHS projects. Large hydro power projects in India commonly get embroiled in social and political issues mostly related to loss of significant areas of agricultural flood plains and forest lands, and forced relocation without just compensation for affected rural communities. Inter-state disputes over water rights compound environmental issues such as flood safety concerns and agricultural needs”, said the report co-authored by Tim Buckley, director of energy finance studies (Australasia) and Kashish Shah, research associate, IEEFA.

Further, with seasonal water flows and mountainous, remote locations, hydro-electricity requires very patient capital, and engineering technology is certainly challenged.

Despite the challenges, PHS is ideally suited to play a leading role given the country’s enormous plans for new low-cost, deflationary, domestic renewable energy also comes with an associated, critical need to accelerate the deployment of storage.

The IEEFA report banks on two promising government interventions that augur well for the concept of storage energy. The country amended its ‘hybrid wind-solar with storage’ policy to clarify that any form of storage – not just batteries – could be used in hybrid projects, including PHS, compressed air and flywheels. More recently, in March 2019, the Union ministry of power proposed electricity rule changes to incentivise electricity supply at times of peak demand, a key pricing signal needed to underpin financial bankability of storage projects.

Globally, PHS is an established, proven and cost-effective technology for storing electricity at times of high generation and or low demand which can then be released into peak demand periods.  There is some 140 GW of PHS capacity installed globally providing well over 95 per cent of global electricity storage capacity.  PHS has a round trip efficiency of 70-80 per cent (meaning 20-30 per cent of electricity is lost), depending upon the distance and gradient separating upper and lower reservoirs. It is designed to time-shift electricity to periods of peak demand so that power is stored when it is least expensive and then used during peak demand when prices are highest.  With its almost instantaneous start capacity, PHS is ideal for meeting evening peaks as well as providing grid frequency stabilisation services.

“While hydro-electricity is fraught with social issues in India and many other non-temperate, monsoonal climates and areas of high population densities, PHS has a much smaller footprint. PHS can play an immensely important role in facilitating India’s improved energy security and transition to a lower cost, low carbon electricity market that will require flexible, dispatchable, as well as peak power capacity, especially until battery storage becomes cost competitive”, the authors noted.