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“Recent market and regulatory developments indicate India’s battery storage market could boom in no time”.

Jan 31, 2022
Kashish Shah is an Energy Finance Analyst with the Institute for Energy Economics & Financial Analysis (IEEFA). He specialises in financing, policy, and technology matters of the Indian electricity market. He has a master’s degree in economics from the University of Sydney and an engineering degree from NMIMS University in Mumbai. Previously, Kashish has worked in the Global Analytics Division of the Royal Bank of Scotland with a focus on regulatory policies. He has research experiences in India’s public sector in his work for a member of the Indian Parliament and a University of Sydney-based research group.

Praveen Gupta: Do you see any disconnects between our coal addiction, net zero commitments, ongoing efforts to raise the coal production and the urgency in raising the share of RE?

Kashish Shah: India is the world’s third largest and one of the fastest growing electricity markets. We will continue to need additional power capacity to serve electricity demand growth of 5-6% annually for this decade.

I think we have not been able to build renewables capacity fast enough. To reach the target of 450GW by 2030, we need an annual build rate of ~35GW from the build rate of 10-15GW last 5 years. Furthermore, we would require substantial energy storage capacity for grid-balancing.

This would allow India to phase out its coal-fired power fleet and transform its electricity system to be cheaper, cleaner and more reliable.

India is the world’s third largest and one of the fastest growing electricity markets. We will continue to need additional power capacity to serve electricity demand growth of 5-6% annually for this decade.

PG: There is a big gap between the gross capacity of thermal energy and the actual capacity utilization?

KS: Yes, India’s coal-fired power fleet has been operating an unsustainably low utilisation factor of ~55% for the last several years.

PG: Are the discoms favourably inclined towards aligning with RE sources?

KS: The discoms continue to be in bad financial shape. However, government-owned entities such as Solar Energy Corporation of India (SECI) and NTPC are playing a key role in underwriting renewable energy contracts and reducing the counterparty risk.

PG: Do you see challenges coming from the land supply, water shortages, disposal of solar panel wastes as a spoilsport?

KS: Solar power operations use a fraction of water compared to thermal power plants. Now developers are employing water-free technology for cleaning the panels.

PG: Where are we on the battery supply side? How soon can that front be ramped up?

KS: In our view, recent market and regulatory developments indicate India’s battery storage market could boom in no time. Continuing a decade-long deflation in costs, solar plus batteries are cost competitive with new coal-fired plants in markets such as the U.S. and Australia, where battery storage development is burgeoning.

In India, there is a similar prospect for a surge in uptake of battery storage as the learning-by-doing experience deepens as new projects, backed by tenders from government-owned entities such as NTPC and Solar Energy Corporation of India (SECI), are executed.

ReNew Power, one of the biggest renewable energy developers in India, and Fluence Energy, a leading battery technology provider, have announced a joint venture to develop a 150MWh storage facility in Karnataka. ReNew Power has won numerous RE plus storage tenders and the battery project will play a key role in delivering firmed RE capacity.

The cost of batteries could reduce further with local manufacture.

The Government of India is striving to support the localisation of batteries’ value-chain with a Production Linked Incentive (PLI) scheme worth Rs18,100 crore (US$2.47Bn) for 50GWh of battery storage for electric vehicles (EVs) and stationary battery storage. The tender has been oversubscribed 2.6 times with bids received for 130GWh of battery manufacturing capacity. The interested parties are Reliance New Energy Solar, Hyundai Global Motors, Ola Electric Mobility, Lucas-TVS, Mahindra & Mahindra, Amara Raja Batteries, Exide Industries, Rajesh Exports, Larsen & Toubro, and India Power Corporation.

They have a track record of delivering dramatic cost reduction in the sectors it has ventured into and it would not be a surprise if they manage to do the same in the clean energy space.

Reliance’s entry into the market could change the landscape dramatically. Reliance is looking to acquire world-leading technology and to further scale it up in the Indian market. They have a track record of delivering dramatic cost reduction in the sectors it has ventured into and it would not be a surprise if they manage to do the same in the clean energy space.

PG: How do you see dealing with rare minerals like lithium and its unique sensitive supply chain issues?

KS: Yes, that is going to be a challenge. The recent supply shortages in lithium have put a halt to the decade long deflation in lithium-ion battery storage. This is where diversification of storage technology will come into the picture. There are other battery technology alternatives such as storage, Sodium Sulphur, zinc-air, liquid metal and storage systems based on gravity and compressed air. The recent global supply shortage in lithium is mainly induced due to the pandemic driven supply-chain bottlenecks. This would probably ease out as the pandemic subsides.

PG: How do you see the equation change as private operators play an increasingly larger role in the overall pie?

KS: In my opinion, the transition should be market-driven for it to be sustainable.

PG: What is the rationale for gas?


KS: Gas has never been viable for India in the absence of local availability of the fuel. We should look to leapfrog to green hydrogen. That is the future!

PG: Do you expect any budgetary sops to further boost solar and wind generation?

KS: Rationalisation of GST on solar equipment will provide a much-needed clarity for the industry. I think we could expect that in this year’s budget. Additionally, I hope to see some budgetary allocation for the research and development of the green hydrogen industry. For example in Australia, Australian Renewable Energy Agency (ARENA) has funded roughly 10-12 test projects for green hydrogen development.

PG: Many thanks for these quick & succinct insights, Kashish. I appreciate your general sense of optimism.

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One Comment
  1. V Raghunathan permalink

    A very relevant dialogue, even if RE is still too small and fragmented an alternative, at least in the foreseeable future.

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