The Government of Gujarat has notified the Pumped Storage Project (PSP) Policy 2025, aiming to establish 75 GWh of storage capacity by 2035, with a longer-term goal of developing 100 PSPs by 2047.

The policy also aims to facilitate investments of nearly ₹750 billion (~$8.35 billion).

The policy will remain in force for 10 years, with incentives applicable for up to 40 years or the project’s operational life, whichever is earlier.

Gujarat identifies PSPs as a proven and mature energy storage technology capable of absorbing surplus renewable energy during off-peak hours and supplying power during periods of high demand. By enabling energy shifting, frequency regulation, and rapid response capabilities, PSPs are expected to play a central role in maintaining grid stability as renewable capacity continues to scale up.

Project Allocation

The policy introduces a structured approach to project allocation, allowing pumped storage sites to be developed through nomination, competitive bidding, or self-identification, depending on the project category and end-use requirements.

• Category I (Nomination basis): Sites will be allotted directly to central public sector undertakings, state public sector undertakings, or joint ventures between central or state public sector undertakings.
• Category II (Competitive bidding): Sites may be awarded to private developers or public sector undertakings through competitive bidding. The state government will periodically notify the list of these sites.
• Category III (Competitive bidding): Sites may be awarded to private developers or public sector undertakings through competitive bidding. The state government will periodically notify the list of these sites.
• Category IV (Self-identified sites): These include sites identified by developers that are located away from river systems and are not listed under Category I, II, or III. Such sites can only be developed as off-stream closed-loop PSPs.

Sites under Categories I and II will be reserved exclusively to meet the state’s power requirements.

Sites under Categories III and IV will not be reserved exclusively for the state, and the stored energy capacity can be used for captive consumption, third-party supply, open-access consumers, power exchange sales, or supply to distribution companies and utilities.

This framework enables participation from central and state public sector undertakings as well as private developers, while also allowing flexibility for projects serving utilities, distribution companies, open-access consumers, and power exchanges.

Incentives

To enhance project viability and attract large-scale investment, the policy provides exemptions from electricity duty for renewable energy used for pumping operations, relaxes water charges, particularly for off-stream PSPs, and facilitates the use of carbon credits, where applicable.

Under the water-use framework, on-stream and off-stream open-loop projects will be exempt from water charges. Off-stream closed-loop projects will be subject to one-time water allotment charges and recurring water usage fees.

Government land may be allotted for projects as needed, while developers may acquire private land independently. Forest land diversion is allowed in accordance with prevailing environmental regulations, subject to statutory approvals.

Developers will also be required to comply with local area development, rehabilitation, and resettlement obligations on a case-by-case basis until formal guidelines are notified, with an emphasis on community development and local skill development in project-affected areas.

Institutional and Regulatory Oversight

The implementation of the policy will be overseen by a three-tier institutional structure comprising an Apex Committee, a State-Level Executive Committee, and District-Level Implementation Committees.

Gujarat Urja Vikas Nigam will act as the nodal agency for Category I and Category II projects, while Gujarat Power Corporation will be responsible for Category III and Category IV developments.

The state recently notified the Green Hydrogen Policy 2025 to achieve a production capacity of 3 million metric tons per annum by 2035.

Subscribe to Mercom’s real-time Regulatory Updates to ensure you don’t miss any critical updates from the renewable industry.