Pumped hydro has few takers

27 September 2020 |

Pumped hydro has once again emerged in the power sector discourse with Greenko developing a 1,200 MW site in Andhra Pradesh and another 1,260 MW site in Karnataka. The Andhra Pradesh project would be coupled with solar and wind power plants as part of the company’s 900 MW project win in SECI’s 1,200 MW peak power tender. Separately, Andhra Pradesh has recently invited EOIs for preparation of pre-feasibility studies and detailed project reports for 6.3 GW pumped hydro capacity across seven locations in the state.

  • Greenko would be the first developer in India to build a pumped hydro project co-located with wind and solar plants;
  • Due to high development risk and rapidly falling cost of battery technologies, viability window for pumped hydro is short and no other developers seem keen on it;
  • Greenko’s willingness and ability to develop pumped hydro projects in anticipation of market demand could pay handsome rewards;

Use of pumped hydro for balancing the grid has been under consideration for a few years as share of renewable power in the grid has been rising steadily. But so far, it has mainly remained a talk with little on-the-ground action. Greenko would be the first developer in India to build a pumped hydro project co-located with wind and solar plants. The main problem is that gestation period for pumped hydro projects is typically 5-7 years, often even longer. This timeframe is not consistent with tendering process for renewable projects, where completion is expected within 18-24 months of PPA date.

Pumped hydro has significant advantages as well as disadvantages when compared with batteries and other forms of storage. It has lower capital cost, can provide longer duration storage, is much safer, has no import dependence and has a very long project life of over 50 years. As an example, Greenko’s 1,200 MW pumped hydro component has estimated capital cost of INR 55 billion (USD 725 million), effectively about USD 75/ kWh, much lower than cost of battery storage systems estimated of approximately USD 300/ kWh. Pumped hydro is also a very versatile technology – it can provide a wide range of grid services including balancing and ancillary services as well as optimisation of transmission system. These advantages are offset by two formidable disadvantages. First, the long gestation period comes with high development, environmental and construction risk. Project bankability is low and even public sector developers shy away from these projects. Second, while India is touted to have a total pumped hydro potential of close to 100 GW, there is no assessment of how many sites are suitable for co-located solar and wind projects.

Government agencies can mitigate some of the development risk by identifying potential sites and completing social and environmental risk assessment studies in advance. Other states should take a cue from Andhra Pradesh in this regard. We believe that given the rapid advancements in battery technologies, pumped hydro has a limited time window of 5-7 years. It is difficult to conceive construction of new pumped hydro projects beyond this timeframe.

Greenko has followed an exceptional approach in anticipating need for storage and developing pumped hydro projects. The company, aided by ample and patient equity support, has been identifying and developing suitable sites while waiting for the right bidding opportunities. This approach could pay handsome rewards as procurement agencies issue more hybrid schemes for firm, dispatchable power.

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