Budget 2023 may give much needed fillip to pumped storage hydropower projects. Here's how

Finance Minister Nirmala Sitharaman will present the last full Union Budget of the Narendra Modi-led National Democratic Alliance (NDA) government’s current term on February 1.

After a wait of nearly two years, the government is likely to announce key aspects of its policy framework for pumped storage plants (PSP) in the 2023 Union Budget that will be presented by Union Finance Minister Nirmala Sitharaman on February 1.

Senior power ministry officials have told Moneycontrol that in order to boost pumped storage hydropower projects, the government is likely to exempt off-river or off-stream PSPs from environmental impact assessment, which is currently mandatory for all such projects.

“Big hydropower projects need to mandatorily get an environmental impact assessment done, but we don’t necessarily want the same for all forms of PSPs. We have proposed that PSPs that are off-river should get faster clearances. The clearance framework will also be much simpler. We are closely working with the ministry of environment, forest and climate change on this,” Alok Kumar, Secretary, Ministry of Power, told Moneycontrol.

Pumped storage hydropower plants act like giant batteries and are essential for the storage of renewable solar and wind energy, that are mired with problems of intermittency. Such plants use two water reservoirs at different elevations. Water is moved from the upper reservoir to the lower one through a turbine which generates electricity. The system also requires electricity as it pumps the water back into the upper reservoir. Solar and wind energy are used for this.

A second senior power ministry official said that the government was not going to offer this electricity for free. “There has been a common perception that the electricity required to run PSPs will be free. Such a scheme exists for hydroelectric projects. But there will be no free electricity for PSPs. Renewable energy rates in India are already competitive,” said the official requesting anonymity.

While the detailed policy is likely to be notified after the 2023 Budget, officials said major chunks of the document are likely to be talked about by the Finance Minister on February 1.

On January 16, Moneycontrol reported that Budget 2023 may focus on clean energy storage and transmission.

The policy will also lay down detailed guidelines for the states for the allocation of pumped storage hydropower project sites in a transparent manner.

Government data shows that as of now India has only about 3.3 gigawatts (GW) of pumped storage hydropower capacity. As per the government’s own estimates, the country has a potential of at least 103 GW of pumped hydro capacity.

In July 2022, for the first time, the ministry of power adopted an energy storage obligation alongside its already-existing renewable power purchase policy. Besides, the government also determined that large pumped hydro energy storage systems over 25MW should be included in the renewable purchase obligations (RPO) under a separate “Hydro Purchase Obligation.”