Madhya Pradesh Launches Comprehensive Pumped Hydro Storage Policy to Boost Renewable Energy Integration

Introduction

The state of Madhya Pradesh has launched a pioneering policy, the Scheme for Implementation of Pumped Hydro Storage (PHS) Project in Madhya Pradesh (February 2025), to drive the adoption of renewable energy (RE) and cater to grid stability issues. With India’s solar and wind potential standing at over 1,444 GW, the state wants to unlock its estimated 7 GW of on-river PHS potential (and non-exploited off-river capacity) in order to even out RE intermittency. The policy provides a structured approach towards PHS development, with focus on competitive bidding, incentives, and quick clearances, and makes Madhya Pradesh a leading energy storage solutions provider.

Explanation (Key Points)

1. Policy Objectives

• The policy aims to stabilize grid stability through 12,000 MW of 4-hour energy storage facilities to be installed by 2034-35.
• The policy aims to help Madhya Pradesh achieve its target of 29,956 MW solar power and 5,293 MW wind power capacity by 2034-35.
• The project will support India’s Energy Storage Obligation by achieving 4% by FY 2029-30 while accessing central incentives such as waived inter-state transmission charges for PHS.

2. Four Modes of Project Development

• The first mode of project development involves CPSUs and state PSUs and government authorities receiving project nominations from the Ken-Betwa Link Project Authority as an example. MPPMCL retains 100% Right of First Refusal (ROFR).
• The second mode of project development involves off-stream projects for third parties or power exchanges or captive use which are allocated through competitive bidding without MPPMCL retaining any Right of First Refusal.
• The third project development mode includes competitive bidding for power supply projects to MPPMCL and public entities while offering BOOT (Build-Own-Operate-Transfer) model options.
• Private developers can initiate off-stream projects under Mode IV while MPPMCL maintains the right to buy 50% of the project.

3. Incentives and Benefits

• Financial Relief:

The project will receive a 50% reduction in wheeling fees for five years starting from commissioning.

o Stamp duty reimbursement (65%) for private land acquisition.

o Exemption from electricity duty and energy development cess for 10 years.

The government provides Mode III projects with land allocation at reduced prices which amount to 35% of the guideline value.

The VGF program exists exclusively for Mode III projects which supply electricity to MPPMCL.

4. Timelines and Compliance

• The completion timeline for all modes including DPR approval and land acquisition stretches to 7 years.
• The implementation timeline for Mode IV projects extends to four years following registration and includes specific stages that must be completed at different points (environmental clearances must be obtained within 1.5 years).
• The project can obtain extensions when statutory clearances such as environment and forest approvals take longer than expected.

5. Regulatory Framework

• The Office of the Commissioner New and Renewable Energy functions as the nodal agency to handle registrations and review processes and cancellation procedures.
• Rewa Ultra Mega Solar Limited (RUMSL) through its role as Special Purpose Vehicle (SPV) operates the bidding process while allocating sites and establishing SPVs to de-risk projects.
• Environmental Safeguards: Mandatory MOEF&CC clearances and adherence to EIA 2006 norms for off-stream projects.

6. Market Mechanisms

• The bidding process includes two main parameters which are defined for transparency purposes: tariff models (Tolling or Composite) and technical criteria (e.g., storage duration, cycles).
• After the bidding process MPPMCL has the right to obtain either 100% (Mode I) or 50% (Mode IV) of the capacity for low-cost storage power access.

Conclusion

Madhya Pradesh’s PHS policy represents a strategic jump towards attaining energy security and decarbonization. With flexible project models, strong incentives, and firm deadlines, the state hopes to unlock its 7 GW PHS potential along with private investment. This model not only tackles RE integration issues but also meets national objectives, and other states should follow its example. When the policy comes into effect, its success will depend on effective implementation, stakeholder cooperation, and ongoing responsiveness to technological innovations in energy storage.