TNERC approves tariff for 500 MW pumped storage power purchase

CHENNAI: The Tamil Nadu Electricity Regulatory Commission has approved the tariff for acquiring 500 MW of pumped storage capacity by Tamil Nadu Power Distribution Corporation Limited (TNPDCL) from Greenko AP01 IREP Private Limited, enabling a four-year agreement to meet the State's rising peak power demand.

In its order dated April 30, the commission adopted a tariff discovered through competitive bidding, fixing an annual fixed charge of Rs 123 lakh per MW with a declared cycle loss of 22.5%, resulting in a total annual storage cost of Rs 150.675 lakh per MW.

The project, located in Kurnool in Andhra Pradesh, will provide stored energy with a cumulative discharge capability of up to nine hours a day, including six hours of continuous discharge, mainly to meet the evening peak demand between 6 pm and midnight.

Though the tender attracted only a lone bidder, TNERC chairman R Manivannan and member K Venkatesan held that the bidding process, conducted through e-tender and reverse auction, was transparent and in line with Union Ministry of Power guidelines.

The tariff was initially discovered at Rs 157.41 lakh per MW per annum during the reverse auction and was later reduced through negotiations.

Although the original tender envisioned a five-year contract, the agreement period has been reduced to four years starting May 1, 2026, considering the urgency to address peak shortages.

Tamil Nadu Power Distribution Corporation Limited Board approved the procurement through a circular resolution on March 13, citing the need to bridge peak deficits that could exceed 10,000 MW in the coming years under certain scenarios.

The order highlights that Tamil Nadu is witnessing increasing peak demand and growing renewable energy penetration, creating a mismatch between daytime surplus solar power and evening deficits.

According to projections cited in the order, peak demand is expected to rise from about 21,959 MW in 2025-26 to over 35,500 MW by 2034-35, while energy consumption is projected to cross 2,49,000 million units.

TNPDCL chief engineer (PPP) Richardson Wilson submitted that pumped storage was essential to manage intermittency and ensure grid stability.

Data presented in the order shows that evening power purchase costs from exchanges ranged widely between Rs 2.92 and Rs 10.28 per unit in 2024-25, underlining volatility and the need for firm storage-backed supply.

The effective landed cost of the Greenko pumped storage project under the approved contract is estimated between Rs 7.87 and Rs 8.85 per unit, depending on input energy cost.

The installed capacity of Kadamparai pumped storage plant is 400 MW, with four units of 100 MW each, of which only one unit is currently operational. The cost of generation has varied from Rs 0.37 per unit in 2011-12 to Rs 3.51 per unit in 2023-24 and Rs 1.68 per unit for 2025-26.

As per data from the projects wing, the levelised tariff for the upcoming Kundha pumped storage project Stage VII is estimated at Rs 10.89 per kWh, comprising a fixed cost of Rs 7.89 per kWh and a variable pumping cost of Rs 3 per kWh.

While approving the tariff, the commission imposed conditions to ensure accountability and cost efficiency, including separate metering for pumping and generation, adherence to State Load Despatch Centre schedules, and restrictions on passing inefficiency-related costs to consumers.

The utility has also been directed to submit quarterly operational data and will be subject to prudence checks during tariff determination.