Navdeep Gupta Sunil Dayal
The 2015 Paris agreement was a landmark agreement to combat climate change and to accelerate and intensify the actions and investments needed for a sustainable low carbon future.
To reach these ambitious goals, appropriate mobilization and provision of financial resources, a new technology framework and enhanced capacity-building is to be put in place, thus supporting action by developing countries and the most vulnerable countries, in line with their own national objectives.
India made a commitment at Paris agreement in 2015 to meet 40% of its electricity generation from non-fossil fuels by 2030, the country is working aggressively for large scale deployment of renewable energy.
Recently, India achieved a significant milestone in renewable energy development with installation of 100 GW RE capacity. In addition to it, around 50 GW is under installation and another 27 GW is under tendering which makes significant pipeline for achieving the 175 GW target by 2022.
The International Energy Agency (IEA) in its recent India Energy Outlook 2021 predicts that by 2040 India could add 900 GW of renewable capacity with renewable energy becoming the dominant source of power supply in India’s electricity system.
Grid-stability issues need to be addressed
Until now, the transition to renewable energy was relatively smooth with minimum technical challenges. However, the next phase of renewable development in India will have significant impact on the grid stability. Higher penetration of renewables generation capacity without the ability to store energy can result in stability issues in the grid thereby inducing a great deal of variability.
The uncertainty of generation from renewable resources because of their intermittent nature affect the energy planning severely. Secondly, with advancement of Electric Vehicles adoption with a national vision of “100% electrification of transportation by 2030” will further affect the grid stability.
Energy storage to play pivotal role in grid-stability
This increased variability in power generation caused by renewables and variable load of Electric Vehicles would require more flexibility in the grid which can be achieved either by extensive demand side management, building reserve generation and grid level energy storage using batteries.
In case of demand – supply mismatch impacting grid stability, batteries can respond to the changes with least response time compared to slow responding mechanical, spinning reserves. Additionally, battery system can play a critical role in improving grid resilience and robustness in the face of weather outages and other potential disturbances.
Plummeting battery cost to lead its large-scale deployment
Globally, Li-ion battery system’s cost has plummeted from USD 1,100/kWh in 2010 to USD 135/kWh in 2020 (2019 prices in real terms). As estimated by HIS Markit, the cost of Li-ion battery cell will fall below USD 100/kWh in the next three years and to USD 73/kWh by the end of 2030.
On the similar line, Bloomberg NEF (BNEF) projects a decline in the Li-ion cell cost to USD 58/kWh by 2030. Major drives for fall in price of Li-ion batteries include extensive use in powering electric vehicles and power grids. IEA’s India Energy Outlook 2021 estimated that India could have 140-200 GW of battery storage capacity by 2040, which is the largest of any country.
Feeder level battery storage system in rural areas can ensure reliable electricity supply
In addition to deployment of grid level energy storage, battery storage can play pivotal role in setting up rural micro grids with diversified loads or stand-alone systems. A central electric energy storage can be installed in discrete communities, forming as segmentations along the rural feeders, augmenting the rural electricity distribution. In this model, battery storage is installed centrally in each community, is owned, and operated by an aggregator/retailer, trading bidirectional energy transactions with both the grid and the customers.
This model can be further developed to find optimum investment in storage capacity in rural feeders for minimum annual energy purchase cost using energy arbitrage opportunities, while maintaining an allowable level of system average interruption duration index (SAIDI).
Battery storage industry is set to grow exponentially
To leverage the falling cost of battery storage and its effectiveness in stabilizing the grid both at central and decentralized level, it is imperative to have policies and programs to cater to the huge demand for battery storage in coming years.
Batteries’ local manufacturing will play a key role in lowering the costs and ensuring supply chain security. With conducive policies and programs, the Government is providing ecosystem for battery storage system development in India.
India’s National Mission on Transformative Mobility and Battery Storage is aimed at ensuring phased development of large-scale battery manufacturing capacity in India. Recently NITI Aayog proposed to set up ten large factories for Li-ion battery manufacturing.
In addition to that, Indian Government announced Production Linked Incentive (PLI) Scheme ‘National Programme on Advanced Chemistry Cell (ACC) Battery Storage’ for achieving manufacturing capacity of 50 GWh of ACC and 5 GWh of “Niche” ACC with a financial support corpus of about USD 2.45 Bn. With such incentives, battery storage is set to become more efficient and economical, paving way for a fossil free future of India and the world.
This article is jointly authored by Navdeep Gupta & Sunil Dayal. Both are energy sector experts and have worked with large IPPs, global PE funds, European Utilities, Multilateral Agencies and Government on RE & Power related areas.
Navdeep is an alumnus of IIT Delhi and ISB Hyderabad while Sunil is an alumnus of IIT Delhi and the Said Business School, University of Oxford. Navdeep works as the Head of Market Analysis with Statkraft Markets India Pvt Ltd. Sunil is currently a member of the India Energy Storage Team at the World Bank.
Disclaimer: The views, information or opinions expressed in the article are those of the authors and do not necessarily reflect the views of The World Bank or Statkraft Markets India.
