CIL, NHPC may convert old mines to pump storage

State-run Coal India Ltd and India’s largest hydropower company NHPC Ltd may join hands to explore the possibility of converting abandoned or closed mines into pump storage projects (PSP).

A person aware of the development said the coal ministry under its plan to set up PSPs at “de-coaled areas”, where all the coal has been mined, has directed Coal India to partner with NHPC and other related agencies. Coal India is currently in the process of appointing a consultant for the project.

PSPs are hydro-projects where two reservoirs at different heights generate power as water moves through turbines.

“Because in our coal mines we have huge height, if a storage is created at the top then during day time, there would be solar (power), (through which) water can be stored there and during the night hydro power can be generated,” said the person.

Another person said some of the closed mines may be auctioned out on an ‘as is where is’ basis for setting up of PSPs, from which they developer-cum-operator would be able to sell power.

Responding to a query, the coal ministry said: “Ministry has asked Coal India to coordinate with related agencies to explore the possibility of converting its de-coaled mines to pump storage projects in a bid to boost energy transition.”

NHPC said “there is no proposal to form joint ventures with Coal India to develop PSP projects over de-coaled mines”. Queries mailed to Coal India remained unanswered.

So far, the mining major and its subsidiaries have been adopting several steps for alternative use of these mines including dumping or filling of fly ash for reclamation of land, development of eco and mine tourism parks, afforestation, pisciculture, a source for supply of drinking water and other domestic use, and generation of sand from opencast mines.

The plan for setting up pump storage projects comes at a time when there is both policy focus and investor interest on the segment.

In PSPs, excess energy is used to pump water to an upper reservoir when power demand is low. When demand rises, water is released, turning a turbine which generates electricity. PSPs and battery storage projects are often used alongside solar or wind power projects to ensure stable power supply.

In April, the power ministry issued guidelines on concessional climate finance and uniform environment clearances for pumped storage projects to add around 5GW. According to the Centre, states must ensure that no upfront premium is charged for project allocation.

Besides, in a bid to ensure financing for these capital-intensive projects, the Centre said financial institutions such as Power Finance Corp., Rural Electrification Corp. and Indian Renewable Energy Development Agency will treat PSPs on par with other renewable energy projects for extending long-term loans of 20-25 years. The debt-equity ratio of the projects can be up to 80:20 in consultation with the financial institutions, according to the guidelines.

As India adds more renewable energy capacity, it also needs to ensure grid stability, and pumped storage is a key solution for grid reliability. It helps set up affordable, large storage capacities for electricity distribution. PSPs are expected to remain more cost-competitive than battery energy storage systems. In terms of longevity, with an estimated lifespan of 40 years, PSPs fare better than battery storage, which has a lifespan of about 10 years, according to industry experts.

On 5 March, Mint reported that NHPC Ltd, Tata Power Ltd, Adani Green Energy Ltd and JSW Energy Ltd are among companies that have proposed to build PSPs totalling 39GW in the country, potentially attracting investments of as much as ₹3.12 trillion.

Several energy companies have plans to set up PSPs in India, adding to the country’s installed PSP capacity of 4.7GW. Mint earlier reported that NHPC was planning PSPs totalling 20,000-22,000MW.