TNERC Approves 500 MW Pumped Storage Power Procurement For Tamil Nadu Grid Stability

The Tamil Nadu Electricity Regulatory Commission has approved a major power purchase proposal submitted by Tamil Nadu Power Distribution Corporation Limited for procuring 500 MW of energy storage capacity from a pumped storage project located in Andhra Pradesh. The order, issued on April 30, 2026, adopts the tariff discovered under Section 63 of the Electricity Act, 2003, for the procurement of storage capacity from the existing grid-connected pumped storage plant operated by Greenko AP01 IREP Private Limited in Kurnool district.

As per the approved agreement, the annual fixed charge has been set at ₹123 lakh per MW per annum, excluding GST, with a declared cycle loss of 22.5%. The contract will remain valid for four years, and commercial operations are scheduled to commence on May 1, 2026.

TNPDCL informed the commission that the procurement was necessary to address growing operational challenges in Tamil Nadu’s power sector. The state has been witnessing excess power generation during daytime hours because of the rapid increase in renewable energy, especially solar power. However, during evening peak demand hours between 6 PM and midnight, the state often faces shortages and is forced to purchase electricity from power exchanges at significantly higher prices, sometimes reaching nearly ₹10 per unit.

The pumped storage system is expected to help optimize this imbalance. During periods of surplus renewable generation, low-cost electricity will be used to pump water to an upper reservoir. The stored water will later be released during evening peak hours to generate electricity when demand rises. This approach is expected to reduce dependence on costly market purchases while improving grid reliability.

The commission also noted projections from the Central Electricity Authority indicating that Tamil Nadu’s peak electricity demand is likely to rise steadily from 21,959 MW in FY 2025-26 to more than 35,507 MW by FY 2034-35. The storage procurement is therefore expected to support the state’s long-term Resource Adequacy planning and strengthen grid stability.

The procurement process was conducted through an e-tender followed by an e-reverse auction. Although multiple extensions were granted to attract wider participation, Greenko remained the only technically qualified bidder. TNPDCL later negotiated with the company after the auction process, leading to a reduction in the initially quoted tariff. TNERC clarified that the presence of a single bidder did not affect the transparency or fairness of the competitive bidding process.

At the same time, the commission imposed several safeguards to protect consumer interests. TNPDCL has been directed to install dedicated metering systems capable of recording pumping and generation data in 15-minute intervals. The plant must also operate strictly according to schedules issued by the State Load Despatch Centre. Any financial losses arising from unscheduled operations cannot be passed on to consumers. In addition, the cost of power used for pumping operations will be reviewed during annual regulatory checks to ensure that only the cheapest available power is utilized for storage activities.