Captive hydropower gives Tata Power a leg up in race for pumped storage power

At a time when renewable energy companies are in a rush to secure sites for pumped-storage hydropower plants, Tata Power will be boosted in the race with its captive hydropower plants, the company’s CEO and managing director Praveer Sinha said.

While the company has announced plans of developing two pumped storage assets in Maharashtra, totaling 2.8 gigawatts of capacity, it can develop up to 12 GW from its captive assets, Sinha said. Coupled with solar and wind power plants, this could help the company deliver up to 48 GW of round-the-clock renewable power.

“I have five reservoirs. Let me first complete these two. Then I will do the other three also. They are not running away from me; they are my reservoirs,” Sinha told Mint in an interview. He clarified that the company has not made any decisions on developing pumped-storage plants at the other sites so far.

Tata Power board last Wednesday approved an investment of ₹5,666 crore into developing a 1-GW pumped storage plant at Bhivpuri in Maharashtra. Construction will begin in January and is expected to be completed by mid-2028, according to Sinha.

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The company is waiting for various approvals for its second pumped storage plant in Maharashtra with a capacity of 1.8 GW, he said, adding that the construction for this plant should begin by the middle of next year.

More locations for pumped storage plants

When questioned if the company feels the need to corner more suitable locations for pumped storage plants, Sinha said that his focus was on developing the two proposed plants first.

“We don't have to go and get allotment of reservoirs. For us it is important to deliver rather than just going and cornering projects,” he said. “What we are saying, we are saying with certainty and committed timelines.”

Tata Power has hydro power plants at Bhira, Bhivpuri and Khopoli in Maharashtra. It also has 50% stake in a hydro power plant each in Zambia and Georgia and a 26% stake in a hydropower plant in Bhutan.

Pumped storage hydropower plants are like giant batteries that can help store excess electricity in the form of potential energy and help even out the inconsistent supply of renewable energy from solar and wind plants. The plants work by connecting two reservoirs at different altitudes. Water is pumped from the lower reservoir to the higher reservoir when excess electricity is available. When there is a shortfall in power supply, they work like conventional hydropower plants where water is released from the higher reservoir through turbines to generate electricity.

Shortage of suitable locations

Few locations are naturally suitable for the construction of such plants, making such sites a scarce resource that renewable energy companies are trying to corner for themselves.

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“There are only a few sites that provide the right combination of existing favourable topography, adequate head and the right geological stability to optimize the construction and operating costs," Hitesh Singh, the head of strategy at Afcons Infrastructure, said in an earlier interview to Mint.

"Such sites will be very lucrative for companies looking to invest in pumped storage,” he had said.

So far there are JSW Energy (6 GW), Adani Green (5 GW) and Greenko (about 7.6 GW) with pumped storage sites, as per public disclosures.

Focus on Round-the-clock Renewable Power

The Tata Group company which has business interests across nearly the entire power value chain—from project development to power generation and distribution—will focus on round-the-clock (RTC) renewable energy going forward, Sinha said.

While it will be relying on battery energy storage systems in the short term, it will prefer pumped storage plants for delivering RTC green energy in the future, he said. The 2.8 GW of pumped storage plants will help the company supply about 12 GW of RTC green power, he said.

The company, which wants to achieve net-zero emissions of carbon by 2045, will not be investing in any greenfield thermal power assets, as per Sinha.

“We will definitely look at opportunities if something comes. If suppose something comes bundled with renewable, we can look at that. But I'm not going for greenfield projects or expansion projects and things like that,” he said.

Presently, Tata Power has about 15 GW of operational power generation capacity, including 8.9 GW from thermal and 4.5 GW of renewable, as per its latest annual report.

“(Tata Power’s) focus on business restructuring and high-growth RE business and entry into power transmission would play a crucial role for sustained earnings growth and improved earnings quality,” Sharekhan analysts noted in a report on 26 September. “In addition, management’s business restructuring plans to increase the share of high growth RE business would help sustain the current valuations.”

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Tata Power shares have gained about 35% since the beginning of this year to close at ₹445.20 on BSE on Friday. The Sensex has given a 10.3% return over the same period.

Key Takeaways

1. The company could deliver up to 48 GW of round-the-clock renewable power. 
2. Tata Power is waiting for approvals for its second pumped storage plant in Maharashtra with a capacity of 1.8 GW, and the construction for this plant should begin by the middle of next year. 
3. The company has hydro power plants at Bhira, Bhivpuri and Khopoli in Maharashtra. It also has 50% stake in a hydro power plant each in Zambia and Georgia and a 26% stake in a hydropower plant in Bhutan. 
4. The Tata Group company will not be investing in any greenfield thermal power assets. 
5. At present, Tata Power has about 15 GW of operational power generation capacity, including 8.9 GW from thermal and 4.5 GW of renewable.