Battery energy storage systems have been a subject of discussion for a long time, however, due to the emerging challenge of integrating large amounts of variable renewable energy into the electric grid, many organisations have recently demonstrated a keen interest to be part of this fast-developing area. There is no doubt that energy storage can play an important role in grid integration and in balancing of variable generation sources, improve power quality, reduce peak demand, enhance capacity of distribution / transmission grids, avoid/reduce deviation penalties, and minimise diesel consumption from back-up power applications.
Wind and solar power are intermittent in nature, as production is dependent on external factors like wind and sunshine. This intermittent nature of renewable energy may cause imbalance in the grid, the frequency of which needs to be maintained between 49.95Hz to 50.05Hz. To address this variability of intermittent generation, a strong need was felt for electricity storage systems and battery storage is a vital part of overall energy storage systems, as well as being a reliable and cost-effective way to balance the grid.
In a report issued in January 2020 titled 'Optimal Generation Capacity Mix for 2029-30', the Central Electricity Authority has envisaged a replacement of thermal-based generation with renewable energy generation, complemented by energy storage technology. This has been a key policy declaration which will influence the course of India's energy planning methodology, highlighting a focus on integration of energy storage systems with existing and upcoming renewable energy capacity to optimise generation and transmission of power.
Previously, in January 2017, the Indian Central Electricity Regulatory Commission ("CERC") published a staff paper on the introduction of electricity storage systems in India1. The CERC recognised that the increasing share of renewable energy in the grid has impacted the traditional approach of balancing in peak and base load management and demand and generation capacity. The solution to this challenge, as per the CERC, was energy storage systems, which could improve the operating capabilities of the grid, lower costs and ensure high reliability.
Broadly speaking, a 'grid-scale' battery storage can be deployed, along with thermal/ renewable energy generators, for:
- Storing surplus energy (during low demand periods) and supply stored energy (during peak demand periods);
- Supplement thermal generation in meeting the statutory ramp up and ramp down requirements;
- Ancillary services as per grid requirements; and
- Minimize unscheduled interchange (UI) and optimizing UI returns.
At present, however, there is no unified energy storage policy in effect in India, although the Ministry of Power, Government of India has (in October 2021) invited inputs from stakeholders, with the aim of formulating such a policy.
In this update, we summarise some of the key developments and opportunities available in India with respect to battery energy storage systems and their progress.
Tenders for setting up battery energy storage systems issued by the Indian Government:
Recently, in August 2021 and September 2021, the Indian government announced its intentions to set up grid-scale battery energy storage systems of approx. 13 GWh and 14 GWh, in the remote areas of Ladakh and Kutch, respectively. Electricity generated and stored in these battery systems will then be supplied to the rest of the country via transmission lines as and when needed. As announced in October 2021, India also intends to invite bids for 4000 MWh grid-scale battery energy storage systems across various regional load dispatch centres (via the Solar Energy Corporation of India).
While the tenders for these large projects are still awaited, it is useful to highlight material provisions of another grid-scale battery energy storage system tender for 1000 MW issued in June, 2021, by the National Thermal Power Corporation ("NTPC") which is India's largest power utility, to set up such systems across its various power plants of NTPC, as guidance for future tenders. The tender issued by NTPC was a 'global' tender, i.e., open to any Indian or global company, their consortium, affiliates or representatives.
In this global tender, NTPC invited bids to set up grid-scale battery energy storage systems at single or multiple NTPC plant locations, for NTPC's identified thermal and renewable energy projects (13 solar projects and 1 wind project). The tender closed in August 2021. Key takeaways of this NTPC tender are summarised below:
- One of the most promising business models of a battery energy storage system is its integration with existing large power plants.
- Main eligibility criteria were: (i) if the bidder was a battery storage manufacturer, then it should have manufactured and supplied batteries for grid-interactive battery energy storage systems of cumulative installed capacity of 5MW/5MWh or higher; or (ii) if the bidder was an integrator (assisting in implementation of battery services for the grid), then it should have integrated works of grid-interactive battery energy storage systems of cumulative installed capacity of 5MW/5MWh.
- All bidders had to supply a 'complete solution', i.e. the entire battery energy storage facility.
- As part of the application, bidders also had to provide information regarding previous experience and details thereof, analysis and assessment of business mode, proposed technology, land required for proposed facility, safety features, investment etc.
It is very likely that future global tenders issued by the Indian government for large battery energy storage systems (including those expected for Ladakh and Kutch) will have similar requirements to the NTPC tender described above.
Production-linked incentives for manufacturing for domestic and overseas investors:
The first action taken by the Indian government in this regard was the launch of a National Programme on Advance Chemistry Cells ("NPACC") in 2020, instituted with the aim of promoting economic growth and local manufacturing in the battery storage sector. As part of the NPACC, the Ministry of Heavy Industry and Public Enterprises notified a production-linked incentives scheme on June 9, 2021 ("ACC PLI"), for both domestic and overseas investors seeking to incorporate giga-scale ACC manufacturing facilities in India. The ACC PLI scheme has a total incentive pay-out of INR 18,100 crore over a 5-year period. The scheme targets to set up advanced storage technologies that can store electric energy, either as electrochemical or chemical energy and convert it back to electrical energy, as and when required. Presently, almost 100% of the demand for ACC battery storage is met through imports. The main features of the ACC PLI scheme are:
- Setting up of a cumulative ACC manufacturing capacity of 50 GWh for ACCs and an additional capacity of 5GWh for niche ACC technologies (minimum threshold capacity of 500 MWh).
- To be eligible for the scheme, bidders have to be allotted capacity to set up ACCs and commit to set up minimum 5 GWh of manufacturing facility.
- Manufacturing process has to be in India.
- Subsidy to be calculated as per formula = Applicable subsidy amount per KWh x percentage of value addition achieved during the period x actual sale of ACC cells (in KWh)
- Actual subsidy is capped at 20% of the ACC sale price. Total annual cash subsidy is capped at 20 GWh per allottee. The PLI subsidy is in addition to incentives under FAME-II policy and PLI-scheme for automobile and auto components where ACC may be used as part of the end-product.
- The ACC manufacturing facility to be commissioned within 2 years by June 2023 and subsidy would be paid out over 5 years until June 2026.
- Allottee has to achieve domestic value addition of at least 25% and incur mandatory investment (INR 225 crore per GWh) within 2 years and raise it to 60% domestic value addition within 5 years.
- States will ensure 'single-window' clearances, encumbrance-free land, trunk infrastructure facilities and concessional rates of power to potential investors.
Waiver of transmission charges for battery energy storage systems:
The Ministry of Power, Government of India, through notification dated June 21, 2021, has allowed waiver of inter-state transmission charges for battery energy storage systems commissioned up to June 30, 2025, provided that 70% of annual electricity requirement for charging of the battery energy storage system is met through use of electricity from solar and/or wind power plants. Further, once applicable, such charges shall be levied gradually, i.e., 25% charges for initial 5 years of operation, then increased after every 3rd year to reach 100% by the 12th year of operation.
What to look out for:
On October 6, 2021, the Ministry of Power announced that it intends to issue comprehensive policy on energy storage in the power sector, focusing on regulatory, financial, tax, demand management and technological aspects, with suggestions invited till October 31, 2021. Such a policy is awaited and will provide clarity and certainty to this sector.
In a similar vein, the Solar Energy Corporation of India has also issued draft guidelines in September 2021, regarding proposals for setting up standalone battery energy storage systems of 1000 MW, with final guidelines expected to be issued soon after stakeholder consultation is concluded. Further, tenders for the 13 GWh Ladakh and 14 GWh Kutch grid-scale battery energy storage systems will also be released shortly, which are likely to be open to 'global' investors.
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