The Tamil Nadu Electricity Regulatory Commission (TNERC) has adopted the tariff discovered for Tamil Nadu Power Distribution Corporation’s (TNPDCL) procurement of 500 MW of pumped storage capacity.

The approved procurement is for 500 MW from an existing grid-connected pumped storage project in Kurnool District, Andhra Pradesh. The approved annual fixed charge is ₹12.3 million (~$128,621)/MW/annum, excluding GST, with a declared cycle loss of 22.5%.

The contract period is four years. The project must provide cumulative discharge capability of up to 9 hours per day, with a maximum continuous discharge capability of 6 hours.

Background

TNPDCL contended that Tamil Nadu needs firm storage support because renewable energy generation, especially solar, is available mainly during daytime, while demand pressure rises during evening peak hours.

The petition stated that TNPDCL often has surplus energy during solar hours but faces deficits from 18:00 to 24:00 hours. Pumped storage would allow TNPDCL to use low-cost or surplus energy for pumping during off-peak periods and obtain dispatchable power during evening peaks.

TNPDCL relied on resource adequacy studies carried out by the Central Electricity Authority for Tamil Nadu. The projections showed peak demand increasing from 21,959 MW in financial year (FY) 2025 to 2026 to 35,507 MW in FYs 2034 to 2035.

Energy requirement was projected to rise from 152,678 million units to 249,580 million units during the same period. TNPDCL also presented a peak-hour deficit analysis before the Commission, showing continuing shortages even after accounting for existing and proposed tie-ups.

It floated a tender in November 2025 for 500 MW from an existing grid-connected pumped storage project.

The tender initially contemplated a five-year procurement period. Because only one bidder emerged, TNPDCL extended the bid submission deadline several times, with the final due date fixed as December 26, 2025. Greenko AP01 IREP was the only bidder and offered the full 500 MW. After negotiation, the final commercial terms were reduced to an annual fixed charge of ₹12.3 million (~$128,621)/MW/annum, excluding GST, with a declared cycle loss of 22.5%. The total annual storage cost came at ₹15.06 million (~$157,482)/MW/annum.

TNPDCL approved the procurement and issued a letter of award to Greenko on March 14, 2026.

TNPDCL also argued that the arrangement was competitive when compared with evening market prices. It stated that the negotiated storage tariff was ₹5.912 (~$0.0618)/kWh, and after accounting for input solar energy costs and cycle losses, the effective landed cost would range from ₹7.878 (~$0.0824)/kWh to ₹8.848 (~$0.0925)/kWh.

The petition compared this with volatile evening exchange prices, which in the financial year 2024 to 2025 frequently reached about ₹7 (~$0.0732)/kWh and at times crossed ₹10 (~$0.1046)/kWh.

Commission’s Analysis

On the bidding process, the Commission found that TNPDCL had followed the Ministry of Power guidelines. It noted that the bidding documents had been approved before the tender was initiated. The Commission held that single-bidder participation does not invalidate the process when the tender was conducted transparently and an adequate opportunity for participation was provided. The extensions granted by TNPDCL supported this conclusion.

It found that pumped storage procurement aligned with Tamil Nadu’s power system needs, including increasing renewable energy, evening peak management, grid reliability, and compliance with resource adequacy requirements. It adopted the tariff after it was discovered through a transparent bidding process under central government guidelines.

The Commission then imposed safeguards. TNPDCL must install separate meters for energy used for pumping and energy delivered from the project. Metering must comply with grid code requirements, including 15-minute time-block accounting and integration with the State Load Despatch Centre.

Pumping and generation must follow schedules approved by the State Load Despatch Centre. Any deviations will be handled under the applicable deviation settlement mechanism regulations, and extra costs from deviations or unscheduled operations cannot be passed through in the tariff.

The Commission also directed that the input energy cost for pumping will be subject to prudence checks during annual revenue requirement and true-up proceedings. TNPDCL must optimize pumping by using low-cost energy, including surplus renewable energy. Avoidable cost increases from imprudent scheduling may be disallowed.

TNPDCL must submit quarterly statements showing energy pumped, energy discharged, and related operating parameters. These filings will allow regulatory review of the project’s operation.

The Commission clarified that this order does not approve deviations from the bidding documents or the pumped storage purchase agreement. Those issues will be decided separately in the miscellaneous petition.

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