India Needs to Be Ready to Ride the Energy Storage Wave, says Report

Battery storage, green hydrogen and flexible coal-fired power generation can help India address its next big challenge of integrating large-scale variable renewable energy into the electricity grid over the next decade, said the Institute for Energy Economics and Financial Analysis (IEEFA) in its new report.

Explaining further, Kashish Shah, Research Analyst at IEEFA, and author of the report, said “the transition to low-cost, variable renewable energy generation requires a flexible grid that can respond rapidly to changes in power demand dynamics.”

“Battery storage can provide a solution to help the grid manage massive amounts of intermittent wind and solar, provide dispatchable power during peak demand periods and other essential grid services. And battery cost deflation is now making utility-scale battery storage projects possible for India,” Shah added.

The International Energy Agency (IEA) in its India Energy Outlook 2021 mentioned that India has the potential to become a world leader in battery storage, predicting that it could add 140-200 GW of battery capacity by 2040 – the largest of any country and more than 100 times as much as currently installed in the US.

Shah further said that “battery storage will likely play an important role in India achieving its renewable energy capacity target of 450GW by 2030. India already has 93GW of on-grid variable renewable energy and is targeting annual additions of 20-40GW.”

However, the report says coal is likely to remain an important source of Indian electricity generation for some time to come and proposes that flexing its generation to cater to the majority of grid variability requirements should be an important focus area.

“Flexible coal-fired plants would require retrofitting, operational and regulatory amendments. This would incur capital costs as well as additional operational expenditure depending upon the size, age and combustion technology of the plant, but this could be rewarded with a higher time-of-day price,” Shah added.

The report calls for policy support for a time-of-day pricing mechanism to incentivise capital investment in key grid-firming solutions to ensure flexible, reliable peak-time power supply.

In the battery storage space, Shah said domestic and international developers as well as utilities are eyeing the very positive battery cost deflation trend but need to see a market signal in the form of time-of-day pricing to attract high initial capital investment into such assets.

The report also looks at the experiences of leaders in integrating large-scale renewables, such as Germany and the states of South Australia and California, in the context of the Indian electricity market.

“While the much-bigger Indian market benefits from its strongly connected national electricity grid, it has its own set of challenges and market structure dynamics in dealing with large-scale variable renewable energy,” said Shah. “But there are interesting lessons for India as renewable energy-rich states such as Rajasthan, Gujarat, Maharashtra, Karnataka and Tamil Nadu could see their shares of renewable generation increase to 50 per cent by 2030 from the current levels of 10-30 per cent.”

Though yet to be commercially deployed in India, green hydrogen, produced through water electrolysis using renewable energy, has a wide range of potential applications in transport, industrial production of ammonia, methanol, steel and electricity storage, and is an opportunity that India cannot afford to miss, said Shah.

He further added that “India’s strategy should be to plan in advance and be prepared to ride the energy storage wave when it arrives.”