The Ministry of Power has released new guidelines for tariff-based competitive bidding to procure storage capacity and stored energy from Pumped Storage Plants (PSPs). These guidelines aim to support India’s energy transition by integrating renewable energy sources while ensuring grid stability and energy security. The initiative aligns with the National Electricity Plan 2023, which estimates a requirement of 74 GW/411 GWh of energy storage by 2031-32, including 27 GW/175 GWh from PSPs.
Energy Storage Systems (ESS), including PSPs, help address the variability of renewable energy caused by weather and time-of-day factors. By storing excess energy and supplying it when needed, PSPs contribute to peak load management, reduced transmission costs, and lower carbon emissions. While India already has procurement guidelines for Battery Energy Storage Systems (BESS), the absence of specific rules for PSPs prompted the government to establish this framework.
The guidelines promote the development of PSPs through a transparent, competitive bidding process. They provide a standardized framework to ensure fair risk-sharing among stakeholders. The procurement process will follow Section 63 of the Electricity Act, 2003, and will apply to developers, intermediary procurers, and end procurers. PSP projects—whether existing, under construction, or newly proposed—are covered under these rules.
The bidding process involves two models. In Mode 1, the procurer identifies the site and prepares the project before awarding it to a developer. In Mode 2, the developer identifies and develops the site independently. The guidelines specify bid evaluation criteria, financial and technical qualifications, project timelines, and performance parameters. The minimum bid capacity is 50 MW for inter-state projects, while intra-state projects may allow smaller capacities.
To ensure financial security, the guidelines mandate an Earnest Money Deposit (EMD) of at least 2% of the estimated project cost and a Performance Guarantee (PG) of at least 5%. The contract term will be defined in the Power Purchase Agreement (PPA), and developers must meet specified availability and efficiency benchmarks. PSPs will be required to comply with grid codes, maintain transition times between pumping and generation, and support reactive power control.
Payment security mechanisms are also included, requiring procurers to follow the Electricity (Late Payment Surcharge and Related Matters) Rules, 2022. In case of procurement delays, penalty clauses will apply, with provisions for liquidated damages due to project shortfalls. If delays in grid connectivity occur due to factors beyond the developer’s control, the scheduled commencement date may be adjusted.
The Ministry of Power reserves the right to modify these guidelines in consultation with stakeholders. The document also emphasizes dispute resolution mechanisms through regulatory commissions and arbitration. By establishing a structured bidding framework, these guidelines aim to accelerate the development of PSPs, enhance renewable energy integration, and improve grid reliability in India.
