Council on Energy, Environment and Water Integrated | International | Independent
Pumped storage hydropower (PSH) is the dominant form of energy storage technology prevalent currently, wherein ~95 per cent of utility storage globally is PSH (MOP, 2023). The Government of India released a set of guidelines in April 2023 to promote PSH projects, including a host of measures like a competitive bidding process, concessional land rates, etc. Further, it is seen that pumped storage hydro is receiving high interest from various private players like M/S Adani Green Energy and M/s Greenko Energies Pvt. Ltd. with upcoming PSH projects of 1200 MW and 1440 MW respectively (Shankar et al. 2023). India has 176 GW of exploitable pumped storage potential with a 4,795 MW potential in Odisha (MOP, 2024). Odisha, with its rich water bodies and reservoirs can look to target large-scale storage for long-duration storage requirements (~8-10 hours) (Kumar, 2022).
Jobs overview
● As per the State Vision, Odisha can look to deploy 3,790 MW of pumped storage hydropower by 2030, which would generate 3,300 FTE jobs.
Figure 1: Phase-wise division of workforce
Source: Authors’ analysis
Figure 2: Relative proportion of high- and semi-skilled workers
Source: Authors’ analysis
Market Opportunity
● The market opportunity 1 for Odisha in 2030 on deployment of 3,790 MW is INR 6000 crore (USD 750 million).
● Kalahandi, Malkanagiri and Koraput are the high-impact districts for PSH projects. These districts are selected for PSH project development by OHPC in Odisha with a total of 1,420 MW capacity (RTI Odisha). They are the Upper Indravati, Balimela and Upper Kolab hydroelectric (HE) projects, which are currently in the stage of Detailed Project Report (DPR) preparation. Other than these, Hirakud HE project in Hirakud, Chiplima HE project in Sambalpur, Rengali HE project in Angul, and Machkund HE project in Koraput are other potential sites for easy PSH development with 670 MW additional storage capacity.
Investment Opportunity
● The deployment of 3,790 MW pumped storage capacity has an investment opportunity of INR 20,000 crore (USD 2,350 million) by 2030.
Currently, all existing pumped hydro systems in India are river-based or open-loop systems. However, there is an alternate method of constructing PSH that does not require significant modification to the river system and that is the off-river (closed loop) system (Blakers et al. 2021). An example of this is the 2 GW, 350 GWh, Snowy 2.0 system currently under construction underground in the World Heritage Kosciuszko National Park in Australia (Snowy Hydro, 2024). The project involves linking two existing dams, Tantangara and Talbingo, through 27km of tunnels and building a new underground power station. It will provide flexible, on-demand power while recycling water in a ‘closed loop’ and maximise the efficiency of renewables. It is expected to create ~4,000 direct jobs during project lifetime and has minimal flood mitigation costs compared to river-based PSH systems (Blakers et al., 2021).
India has 5,745 large dams (Ministry of Jal Shakti, 2023) and Odisha, with 200 large dams (Government of Odisha, 2021), has an excellent opportunity for developing an off-river (closed loop) PSH system by placing it in between two large dams or a dam and a reservoir on hilltop with low impact on biodiversity and water bodies (Kumar, 2022).
1. Role of departments
a. Odisha Hydro Power Corporation (OHPC): OHPC to actively look into the potential sites for more PSH deployment, undertake feasibility studies and work with the Department of Water Resources to identify suitable sites after gaining an understanding of geological, topological and hydrological conditions (Gortz et al 2022). Further, in order to minimise local opposition and land acquisition-related issues as well as time and cost overruns, proper siting to be done through understanding site characteristics, natural reserves, land and transmission infrastructure, livelihood impacts, etc. and strategic mitigation plans should be created around them. OHPC may also assess all existing hydro projects, run-of-the-river and storage dams for PSH potential to minimise resettlement-related issues, ensure road and transmission connectivity, etc. This is already being explored in upcoming projects in Odisha such as the Indravati PSH, and can be looked into further with the existing 2099 MW of large hydro in the state.
b. Odisha Skill Development Authority (OSDA): to look to formally skill local individuals. These include skills relating to operations, maintenance, testing, quality assurance, etc. Current training centres established on site to be utilised to upskill local individuals in basic technical skills, which can be utilised for further employment across RE sectors.
c. Odisha Electricity Regulatory Commission (OERC): OERC to look at differential pricing mechanisms and work closely with academic institutions and the private sector to develop financial models around viable options. This includes deploying different pricing mechanisms during peak and off-peak periods to be able to ensure that it is a profitable venture. Further, integration with the grid can also be explored to aid State Load Dispatch Centres (SLDCs) and support the implementation of time-of-day tariffs. Odisha Power Transmission Corporation Limited (OPTCL) under the Odisha Distribution System Strengthening Project (ODSSP) (OERC 2015) to also look into building transmission and distribution networks.
Private sector to actively look to invest in PSH capacity with rising storage needs and capital requirement and enhance innovation in technology and cost. With ease of investment after the new guidelines on PSH, it will be easier to attract investment from this sector. Further, the private sector should actively invest in research and development to reduce the social and environmental footprint of PSH, as well as make use of global innovations in technology such as closed loop off-river PSH systems.
3. Role of local administration and civil society organisations (CSOs)
Local bodies and civil society organisations to aid the private sector in ensuring adequate resettlement and rehabilitation, knowledge dissemination in the form of project specifics, completion date, etc. It was found that a major reason for resistance from locals was due to lack of awareness of the project benefits and due to their being bothered by project timelines and prolonged construction time (Ali et al. 2021). It is important for local governance bodies like gram panchayat, zilla panchayat, etc. to be the agent of such information dissemination. Further, local bodies can also play a consultative role in enabling the private sector to identify the most impactful rehabilitation and resettlement measures, dependent on the land and ecology, and help prepare mitigation strategies regarding environmental and social risks (Ali et al. 2021).
1. Cost and financial viability of pumped storage plants
a. Currently, PSHs in India are using the conventional model and haven’t been able to keep up with declining solar tariffs due to which DISCOMs find it costly in view of the high investment cost and low gestation period (Kumar 2022). The current pricing mechanism considers PSH only as a generator that needs to recover cost by selling power at a specified tariff. However, it acts as a generator and consumer, drawing power from the grid when water is being pumped from the lower to upper reservoir. This has hampered private investment in the sector since it is difficult for PSH operators to earn profit over and above the fixed and variable costs (CSTEP 2021). Thus, a differential pricing mechanism is proposed to be employed during the pumping mode and generating mode as a solution to fully recover the cost and become financially viable.
2. Land acquisition challenges, social and environmental conflicts
a. Land acquisition is highlighted as one of the major challenges in deploying PSH (The Meghalayan 2024). Pumped storage plants are usually based in and around sensitive forests and demand resettlement and rehabilitation of local communities situated on the land acquired for the project. The first PSH project in India on Ajodhya Hills in West Bengal (900 MW capacity) utilised 373 hectares of forest land and led to local opposition due to loss of forest cover and falling of 3.5 million trees, and affected agricultural produce (Aggarwal 2022). Further, pumped storage plans are exempted from any EIA assessments on old dams and off-river systems.
It is however, important to ensure that an adequate understanding of the socio-ecological impact of PSH plants is conducted beforehand and mitigation strategies are prepared to avoid delay in commissioning of projects and other associated cost overruns (IRADe 2020). Further, the huge environmental costs associated with PSH projects need to be offset against mitigation strategies of restoration and appropriate siting of land (Tandon 2023). The Odisha Government with OHPC should look into rehabilitation and resettlement to ease land acquisition issues and build dialogue with local communities to have just and responsible deployment of PSH plants.
3. Need for facilitating infrastructure
a. The absence of roads and transmission lines is a key technical barrier that prevents access to cheap surplus power, in turn leading to delay in PSH development and reducing the overall output from pumping stations (Blakers et al. 2021). Land, road construction, development costs, and other project study and management costs account for 7—10 per cent of initial costs (CSTEP 2021). Underdeveloped roads limit access and transportation of construction material, thereby delaying construction work. Thus, it is important to ensure good connectivity to project sites.
b. Access to nearby transmission lines is necessary to transport power to pump water to the upper reservoir and balance loads by utilising stored water to generate power. Thus, it becomes important to develop adjoining infrastructure to incentivise PSH development and ensure reduction in cost and time overruns.
4. Skilling related challenges
a. Availability of locally skilled individuals is another challenge faced in pumped storage hydropower deployment. During construction, a large part of the workforce employed is typically local individuals given a PSH plant requires large manpower during this phase (~84 per cent of employment is created during this phase 2 ) and it is generally infeasible to hire contracted labour from other states due to challenges related to relocation.
Further, there are various skilling centres that are established on site by developers which can be utilised to upskill local individuals in basic technical skills. This will help create a trained workforce for renewable energy and help accelerate in the state.
Risk-proofing the scale-up of pumped hydro storage deployment
a. Water availability and quality, water loss, conflict of interest with local water supply (for open-loop systems), loss of oxygen are some of the key risks associated with PSH (Ali et al. 2021). Pumped hydro reservoirs also reduce the quality of surface and underground water (Lu et al., 2020 and Lu et al., 2018). Further, there is also the threat of biodiversity loss due to disturbance of river ecology (Ali et al. 2021) and soil erosion.
Mitigation: Thus, comprehensive hydrological studies are important to determine reliable water resources and develop effective water management strategies, including inflow forecasting, reservoir management, etc.
b. PSH also poses social risks to livelihoods of nearby communities due to dependencies on land and the local ecology
Mitigation: It is important to mitigate these risks by undertaking effective mitigation strategies, generating value for local communities and enabling holistic development.
2. Technological and financial risk
There is a risk of improvement in technology which improves efficiency and thus, induces more competition with selling of electricity at cheaper rates. Although this would lead to social and economical betterment in the long run, it might act as a hindrance to current project development and the fluctuation in electricity prices is a financial risk (Lockton 2020).
Mitigation: It becomes important to ensure risk mitigation via Power Purchase Agreements (PPAs) keeping in mind critical components like turbines, generators and control systems, and utilising market hedging instruments, etc. Further, to minimise risk of equipment failure, it is important to undertake comprehensive maintenance programmes, adequate skill training and equipment condition monitoring.
This section focuses on estimating jobs and markets only for ‘deployment’ of PSH and does not include manufacturing of components or end-of-life management.
PSH deployment is further divided into the stages of 1) construction and commissioning and 2) operations and maintenance. All these sub-phases have been considered for job estimation.
Jobs estimation:
Total number of jobs that can be created through PSH deployment in Odisha by 2030 is calculated using phase-wise full-time equivalent (FTE) per MW coefficients and potential market size.
Total FTE jobs = FTE jobs per MW X potential Market size (MW)
The FTE for large hydro has been considered for pumped storage hydro deployment as follows:
Table 1: The phase-wise FTE considered:
Source: IASS and TERI, 2019
The C&C phase of project deployment (i.e. construction and commissioning) creates one–time jobs whereas in the last phase of the project (i.e. operations and maintenance), the employment generated lasts for the lifetime of the project.
A linear trajectory of wind deployment is assumed, and jobs are calculated so that the workforce employed in one year will be reabsorbed in pumped storage hydro deployment in the next year for the first three phases of project deployment. This would help avoid double-counting jobs and align with the aim of creating a renewable energy workforce that can offer sustained employment through accelerated deployments.
Market sizing (in units):
The market potential was developed based on stakeholder consultation, considering government plans and total technical potential in Odisha. Please note that the potential is cumulative until 2030 and not yearly for 2030.
The market value of pumped storage hydro deployment set for Odisha has been estimated through forecasting the revenue generated from the sales of power in 2030. In order to convert MW ambitious scenario to MWh in terms of electricity generation, the following formula was used:
Capacity Utilisation Factor (CUF) = Injected energy (MWH) / X 9866 X 100
Project capacity (MW)
3 Revenue Potential = Tarif F rate (USD/kWh) X Injected energy (KWh)
Table 2: Input values and rationale for each parameter:
Source: Authors’ analysis
To arrive at the investment opportunity when deploying the ambitious target for wind in Odisha by 2030, we multiplied the cost of pumped storage hydro per MW to the total additional capacity to be installed:
Investment opportunity (USD) = Capital cost of small hydro per MW × Total additional capacity to be isntalled (MW)
Table 3: Cost per MW calculation
Source: Author’s analysis
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