Techno-Economic Assessment of Pumped-Storage Hydropower for Renewable Energy Integration: A Case Study Framework for a 500 MW Project in Nepal

https://doi.org/10.46610/IJEMRES.2026.v02i02.006

Abstract

Nepal’s power system is transitioning from a predominantly hydro-based electricity system toward a larger, more interconnected and increasingly flexible renewable-energy system. Rapid hydropower development, growing electricity demand, seasonal generation variability, and the emerging integration of solar and other variable renewable energy resources create a growing need for grid-scale energy storage. This paper evaluates the technical and economic role of pumped-storage hydropower (PSH), using a proposed 500 MW pumped-storage project in Nepal as a case-study framework. The study combines storage-duration and efficiency calculations with discounted cash-flow analysis and scenario-based sensitivity testing of capital cost, round-trip efficiency, annual cycling, electricity-price spread, and financing conditions. An illustrative base case assumes an 8-hour storage duration, 75% round-trip efficiency, 300 equivalent full cycles per year, USD 1,200/kW capital cost, a USD 50/MWh charging-to-discharge price spread, 8% discount rate, and 40-year economic life. Under these stated assumptions, the project provides approximately 4,000 MWh of usable discharge energy per cycle and an indicative NPV of about USD 86 million, with an IRR of approximately 9.3% and a simple payback of about 10.4 years. The sensitivity analysis shows that electricity-price spread, annual cycling, capital cost, and financing conditions have the strongest effects on project value. The paper concludes that Nepal should assess PSH as a multi-service flexibility asset rather than through energy-only project appraisal, with capacity and ancillary-service remuneration required to strengthen bankability.