Odisha’s Energy Department has released the ‘Odisha Pumped Storage Projects (PSP) Policy’, identifying 45 potential PSP sites for implementation. Such PSPs will be considered state-identified sites.

Through this policy, the state aims to promote the development of pumped storage hydro projects and facilitate the smooth integration of renewable energy into the grid.

The Odisha government will issue operational guidelines in the next 15 days.

All state-identified projects will be allocated through the following route:

• On nomination basis to Central Public Sector Undertakings (CPSU) or State Public Sector Undertakings (SPSU) after consideration of technical and financial capabilities to execute the projects. The prevailing regulations will guide the procurement of power by the Grid Corporation of Odisha (GRIDCO) or distribution companies (DISCOMs) from such projects
• Through a competitive bidding process where bids must be invited based on revenue shared/unit of net energy sent out or any other parameter as decided by the nodal agency, subject to a threshold as decided by it
• Through a tariff-based competitive bidding (TBCB) mechanism based on a composite tariff where the developer arranges input power or a tariff for storage on an MWh basis, where the procurer of the storage arranges the input power

Bidding Criteria

Unless a project is awarded on a nomination basis, the nodal agency or any other process coordinator nominated by the nodal agency will undertake a transparent, competitive bidding process to select the developer for the state-identified projects.

Where bids are not invited under the TBCB mechanism, they will be invited for revenue shared/unit of net energy sent out, or viability gap funding (VGF) required, or any other parameter as decided by the nodal agency.

The projects are eligible for VGF or any financial support from the central and/or state government. However, projects set up for captive consumption/third-party sale will not receive any VGF from the state government.

Self-Identified Off-Stream Projects

Private developers may, on their own, identify suitable sites for off-stream PSPs that are not registered as state-identified projects by the nodal agency.

The nodal agency will notify the date of the window opening for applications for the registration of self-identified off-stream PSPs from all developers, one month after the publication of the operational guidelines.

If multiple developers apply for the same project site, a competitive bidding process will be conducted. In this case, the revenue share for the energy sent out (in kWh) will serve as the basis for selecting a successful bidder. The base revenue share for competitive bidding will be ₹0.1 (~$0.0012) with an escalation of 10% once every five years.

CPSUs and SPSUs will also be allowed to self-identify off-stream PSPs and develop in the same manner as private sector developers.

The nodal agency will process all proposals, including captive PSP proposals, to ensure a uniform approach and single-window processing.

The application must be accompanied by a pre-feasibility report and a non-refundable one-time registration fee of ₹10,000 (~$115)/MW.

Among other details, the pre-feasibility report must include information such as the project location’s layouts and pictures, availability of upper and lower reservoirs, land area requirements, storage capacity of reservoirs, and the estimated potential of the PSP-hydro, including its MW capacity and power-to-energy ratio.

Once the application is approved, the site will be registered with suitable changes and conditions, if applicable. The developer must submit a performance guarantee of ₹200,000 (~$2,302)/MW with a starting validity of two years before the initial allocation.

Sale of Power

For the state-identified projects from which GRIDCO decides to procure the entire saleable power or capacity, the tariff must be determined by the Odisha Electricity Regulatory Commission (OERC), unless the project is awarded through TBCB.

Where a project is awarded on a nomination basis to CPSUs/SPSUs/joint ventures or allotted through competitive bidding (excluding TBCB), the state will have the right of first refusal for up to 80% of the project capacity. The commission will fix the tariff.

For self-identified projects, the state will have the right of first refusal of up to 50% of the project capacity. GRIDCO will be offered 80% of the power generated during the monsoon period (June to September) at the secondary energy rate determined by the Central Electricity Regulatory Commission (CERC) or OERC, when PSPs operate as conventional hydro projects.

If the contracting agency is not fully utilizing the contracted capacity, the developer must transfer the unused capacity to other interested entities, ensuring that resources are not left idle.

This provision of transfer will not apply to captive PSPs. However, such idle capacity can be offered to GRIDCO at a tariff determined by the CERC/OERC.

Incentives

According to the policy, PSPs will be exempt from paying electricity duty and cross-subsidy surcharge on input energy, regardless of the energy source location.

Since water used in PSPs is for non-consumptive purposes, no water cess will be levied on PSPs for either the initial filling of water or the annual refilling of the requisite volume of water allocated by the state’s Water Resources Department. However, the projects will attract water charges.

The developer may be eligible for budgetary support towards the cost of enabling infrastructure from the Ministry of Power, subject to the eligibility criteria.

To reduce costs and enhance PSPs’ acceptance as an energy transition mode, the state government may introduce a program applicable to such projects or energy procured by GRIDCO for DISCOMs.

All projects must be developed in the build-own-operate-transfer model.

The concession period must be 40 years and may be extended by up to 30 additional years, in line with the prevailing rules and regulations, and subject to the state government’s approval.

The projects must be transferred to the state government at the end of the concession period.

Last year, the Ministry of Power modified the provision of budgetary support for hydroelectric and PSP, with a total outlay of ₹124.6 billion (~$1.48 billion). The Ministry will support projects of a cumulative hydroelectric capacity of 31 GW, including 15 GW of PSP capacity from the financial year 2024-25 to 2031-32.

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