Globally, India has one of the largest renewable energy deployment programmes with an ambitious target of 175 GW of installed capacity by 2022. Today, with renewable power increasingly becoming competitive, electricity storage is expected to play a crucial role in enabling the next phase of energy transition. Besides promoting renewable power generation, it will enable increased decarbonisation in the key segments of the energy market. As variable renewables grow to substantial levels, electricity systems will require greater flexibility. At very high shares of variable renewable energy, electricity will need to be stored over days, weeks or months. By providing these essential storage services, electricity storage can drive electricity decarbonisation and help transform the whole energy sector.
Energy storage market today
The push for distributed energy systems and electric mobility has led to a significant demand for energy storage applications. Globally, it is expected that energy storage will account for around 16 TWh by 2030. Although the Indian energy storage market is at a nascent stage, it is expected to grow upwards of 2 TWh by the year 2030.
Energy storage could play an important role in enabling renewable energy penetration without overreliance on transmission corridors, which could require huge capital investments and even remain underutilised due to the variable nature of renewable energy sources. An example of this application is a tender issued by the Solar Energy Corporation of India to set up two solar systems with an aggregate capacity of 14 MW and a battery storage capacity of 42 MWh, in Leh and Kargil. In such remote areas, these projects can help in providing opportunities for utilising clean energy and reducing the dependence on the grid.
Various battery technologies have been developed at the global level, suitable for both stationary applications and transportation markets. It is observed that lithium-ion batteries have high power and energy density, along with a competitive cycle and calendar life, which justifies their use and consideration for a wide variety of applications ranging from electric mobility to off-grid applications.
With a 97 per cent global market share in 2018, lithium-ion technology will leapfrog the erstwhile popular sodium-sulphur, nickel and lead-acid-based storage systems, which will soon see their market share shrink to less than 1 per cent in MWh terms. Intense price competition and price-sensitive consumers have led manufacturers to develop new chemistries and improved processes, resulting in cheaper storage solutions with higher energy densities. It is predicted that by 2030, lithium-ion batteries would be priced as low as $74 per kWh. Apart from lithium-ion, there are many other better performing batteries with new technologies that are at the research stage. These include liquid electrolyte batteries, solid state batteries and metal air batteries.
Issues and challenges
Demand risk: Government schemes such as FAME I and II have helped create an emerging market for energy storage solutions, but more policy interventions are required to unlock demand across all applications.
Low mineral reserves: India does not have reserves of some of the most critical Li-ion components such as lithium, cobalt and nickel, and not even of copper that is used in conductors, cables and busbars.
Cost of battery technologies: Consumers in the solar photovoltaic segment are highly cost sensitive. The backup system (batteries) could increase the upfront cost of a solar system by up to 50 per cent along with the additional maintenance and replacement cost associated with batteries.
Lack of cost-effective cell manufacturing know-how: Cell manufacturing contributes 30-40 per cent to the cost of a battery. Thus, international partnerships will be needed in this space.
Early – stage battery manufacturing industry: India has no major producers of electric vehicle (EV) batteries at present and it lacks state-of-the-art facilities for both sufficient capacity and capability.
Maintenance requirements and performance of battery systems: Batteries require regular maintenance and replacement every few years. Also, battery performance is unreliable and largely depends on usage. Poor battery performance is directly blamed on solar companies. To avoid such situations, companies prefer to install grid-integrated solar systems without battery backup.
Improving power availability scenario: One of the key challenges to increase the penetration of battery technologies is the improving power availability scenario in the existing markets. National statistics suggest that the overall deficit in electricity supply is seeing a significant drop.
Lack of coordination among stakeholders: Key stakeholders in the battery manufacturing ecosystem include material suppliers, battery manufacturers, vehicle manufacturers, research institutes and think tanks. Coordination among these parties is a must to define technology pathways, align investment strategies and timing, and guide policies to help achieve India’s 2030 EV target. The absence of this coordination is a key barrier to streamlining efforts by different industries and organisations in building India’s battery manufacturing supply chain.
High technology risk: This is primarily owing to evolving technological changes, demand uncertainty and the high investments required in setting up battery manufacturing units.
Recycling for material recovery and second-use life: EV batteries have a shelf life of less than 10 years, and after 8-10 years of operation, they are not considered fully functional to power an EV. Also, India doesn’t have any policy framework or mechanism for battery recycling and second-use market.
Although there are many barriers in the adoption of energy storage, there is an opportunity for the country to foray into a new segment in the energy sector by addressing these challenges and leverage the drivers of energy storage to become a manufacturing hub.
Battery life cycle management is fast emerging as a lucrative business opportunity. It is driven primarily by anticipated EV demand, shortage of or restricted access to critical minerals, increasing regulatory push, and useful capacity left in the used EV batteries. The estimated cost of a reused battery is 78 per cent less than that of a new battery. It is expected that 11 million tonnes of Li-ion batteries will be discarded by 2030, creating an untapped market opportunity of $11.8 billion by 2022.
Repurposing of battery driven by inventory management technology solutions such as blockchain can lead to the development of a battery exchange platform, wherein the battery is circulated among various stakeholders in different life phases and is controlled through a centrally managed platform. Thus, there are various opportunities in the energy storage segment for the Indian market. However, to gain maximum benefits, some strategies and initiatives are needed.
The way forward
To make energy storage an attractive business opportunity, the initial focus should be on demand creation. The government can introduce incentives to promote large-scale adoption of energy storage. Some incentives can be differential tariffs, tax incentives, licence exemption, etc.
One way in which the government can provide financial help is by setting up a fund for accelerating the deployment of grid-scale energy storage projects by discoms in the early years. The government, in turn, can be benefited as the discoms can explore learnings from these projects. This can help address technology, policy and commercial risks. Another barrier in the adoption of energy storage by discoms is the lack of rules and regulations as well as incentives. Therefore, a revised regulatory framework is needed to increase the uptake by discoms. On the supply side, one of the key barriers to energy storage in India is the early stage of battery manufacturing for which the country is dependent on imports. One way to reduce this dependence is by sourcing the essential elements such as cobalt and lithium from outside and using them to manufacture home-made Li-ion batteries. Supply chain linkages will be required among various entities in the country to ensure an unbroken value chain that can supply the market with all the batteries it needs.
Based on the EY-FICCI report titled Battery Storage – The Next Big Energy Frontier