The Surge Tank is a reservoir which is located at the end of the penstock. It is located at the entrance to the turbine.
The function of the surge tank is to absorb the excess water when there is a sudden change in the load of the generator. In such a situation, the governor will quickly reduce the water flow into the turbine. As a result of this, very high pressure will be generated which can damage the penstock.
The Surge Tank prevents such a scenario by storing the excess water during a drop in the requirement. Similarly, when there is a sudden increase in the load, a large amount of water will be needed in a very short period. The water flow from the penstock may not be sufficient. The Surge Tank can supply the excess water and ensure that the turbine is able to deliver the required load.