The Government of Madhya Pradesh has introduced a comprehensive scheme for the implementation of Pumped Hydro Storage (PHS) projects in the state. This scheme, notified in February 2025, is designed to promote the development of energy storage systems to support the integration of renewable energy into the power grid. As the demand for renewable energy grows, the variability and intermittency of solar and wind power present challenges. Pumped Hydro Storage systems, considered among the most mature energy storage technologies, offer an effective solution.
According to the Central Electricity Authority (CEA), Madhya Pradesh will require around 29,956 MW of solar power and 5,293 MW of wind power by 2034-35 to meet its growing energy needs. To ensure grid stability and reliability, the state also needs about 12,000 MW of four-hour energy storage capacity. This scheme aims to create a supportive policy environment for the development of PHS projects to meet these requirements.
The scheme outlines four different modes of project development. Mode I allows the allotment of PHS sites on a nomination basis to Central Public Sector Undertakings (CPSUs), State Public Sector Undertakings (SPSUs), and government authorities. Mode II is for projects developed to supply power to third parties, power exchanges, or for captive consumption, through competitive bidding. Mode III supports projects where the Madhya Pradesh Power Management Company Limited (MPPMCL) and other public organizations procure power through competitive bids. Mode IV is for self-identified off-stream pumped storage projects, where developers locate their own sites.
Under the scheme, MPPMCL has the Right of First Refusal (ROFR) on projects developed under Modes I and IV. For Mode I projects, MPPMCL can claim up to 100% of the project’s capacity. For Mode IV, the ROFR is up to 50%.
The scheme includes financial requirements for developers. In Mode IV, developers must submit a bank guarantee of ₹1 lakh per MW for initial allotment, valid for one and a half years, and ₹50,000 per MW at the intermediate stage. Additionally, a construction bank guarantee of ₹25,000 per MW is required at the permanent registration stage. Registration-cum-facilitation fees are also applicable as per the Madhya Pradesh Renewable Energy Policy 2022.
Several incentives are provided to encourage investment. These include a 10-year exemption from electricity duty and energy development cess, partial reimbursement of stamp duty, and waivers on wheeling charges. Developers supplying power to MPPMCL can benefit from zero wheeling charges for charging power within the state. There is also a 20% exemption on registration-cum-facilitation fees.
For land allocation, projects under Modes I, II, and IV receive government land at 100% of the guideline rate, while Mode III projects get land at a 65% concession rate. Developers are responsible for acquiring private land and following rehabilitation and resettlement policies.
The timeline for project completion under Modes I, II, and III includes registration within three months, environmental clearances within three years, land acquisition within four years, and full commissioning within seven years. Mode IV projects have separate milestones, with final commissioning required within four years of project registration.
The scheme also provides for periodic project reviews and monitoring by the nodal agency to ensure timely execution. Any delays without valid reasons can result in the cancellation of project registration.
This Pumped Hydro Storage policy marks a significant step by the Madhya Pradesh government to enhance energy storage infrastructure and support renewable energy growth in the state.
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