In a recent interview with Power Line, Saurabh Kumar, vice-president – India, Global Energy Alliance for People and Planet (GEAPP), elucidated his views on the current state of the battery energy storage system (BESS) market, as well as the challenges and outlook for the technology. Edited excerpts…
How has the market for BESS evolved in the last couple of years?
The market for BESS in India has evolved rapidly, driven by the country’s renewable energy goals and the need to stabilise the grid with variable sources such as wind and solar. By the end of 2021, India had just 20 MW of battery storage capacity, but significant efforts have been made to expand this. The government has introduced policies and incentives to promote BESS, including financial support and regulatory measures. Investments from both domestic and international players have surged, leading to partnerships and joint ventures that bring in essential capital and technological expertise.
Technological advancements in battery efficiency and cost-effectiveness, such as improvements in lithium-ion and solid-state batteries, are addressing key challenges such as energy density and lifecycle costs. Numerous pilot projects across the country are testing BESS applications, providing valuable data to refine future deployments. Large-scale projects are aligning with the Central Electricity Authority‘s goal of 27 GW/108 GWh of grid-scale BESS by 2030, highlighting the critical role BESS will play in India’s energy transition. The high initial costs of BESS installations and the need for grid infrastructure upgrades are being addressed through ongoing technological advancements and supportive policies. With strong governmental support, increasing investments and rapid technological advancements, the BESS sector in India is poised for significant growth. As India aims for 500 GW of non-traditional fuel energy capacity by 2030, BESS will be crucial in ensuring grid reliability and stability, reducing dependence on traditional fuels and contributing to global climate change efforts.
What have been some recent noteworthy developments in this space?
India becoming one of the signatories to the BESS Consortium at COP28, alongside 11 other countries from Asia, the Caribbean, and Africa, has been a landmark achievement. The recent BESS pilot project launched in Delhi, in collaboration with GEAPP, IndiGrid, AmpereHour and New Delhi discom BRPL, marks another milestone. It is the first commercial standalone BESS project in India to receive regulatory approval, signalling promising developments ahead.
In terms of technology, lithium-ion batteries currently dominate the BESS market with over 90 per cent market share. However, the sector is now guided by new criteria focusing on raw material supply and longer-duration storage (six to ten hours). The industry is looking forward to new “non-lithium” technologies gaining traction, such as sodium-ion, iron-air, redox flow and nickel-hydrogen batteries. These technologies are being tested in international markets for their suitability for grid-scale applications, with some expected to reach commercial operations in the next three to five years.
Recently, the first commercial utility-scale BESS project got regulatory approval. Could you tell us more about the project in terms of its significance, implementation timelines, technology, etc.?
The BESS pilot project in Delhi, a collaboration between IndiGrid, AmpereHour and BRPL, is India’s first commercial standalone BESS project to receive regulatory approval. This innovative project aims to enhance grid flexibility and increase the share of low-cost variable renewable energy in Delhi’s energy mix. BRPL will pay a monthly capacity tariff to IndiGrid for 12 years, setting a unique precedent for future BESS projects. Located at BRPL’s 33/11 kV Kilokari substation in South Delhi, the system will have a dispatchable output of 20 MW/40 MWh and occupy approximately 2500 square metres. Designed to operate with a minimum round-trip efficiency of 85 per cent in its first year, decreasing to 82 per cent by the 12th year, the system guarantees an annual availability of at least 95 per cent. The implementation timeline is notably fast-paced: the tender was released in October, regulatory approval was granted by April, and the project is expected to be commissioned by late 2024 or early January 2025. This timeline showcases the efficiency of the multidisciplinary project management unit overseeing the project. The BESS is a 2-hour system (0.5 C) capable of undergoing a maximum of two cycles per day, resulting in a total maximum dispatch of 80 MWh per day. BRPL is responsible for charging, discharging and scheduling the power, adhering to applicable regulations. This project represents a significant leap in India’s renewable energy infrastructure and sets a benchmark for the deployment and operation of future BESS projects in the region.
What are the challenges in scaling up BESS in India? How can these be resolved?
In India, a significant gap exists between the costs of a BESS and the value it can generate under current regulatory frameworks, limiting the development of market-based solutions for BESS. Although upfront hardware costs for BESS in India are similar to those in international markets, financing costs are much higher, particularly for financially constrained electricity utilities and discoms. Furthermore, several potential revenue streams from BESS cannot be monetised due to outdated regulations and the need for power market design reforms. These issues have hindered the timely initiation of the first wave of BESS projects.
As of 2023, approximately 1.5 GW of stand-alone BESS tenders have been stalled for some time, preventing financial closure. However, with the introduction of concessional and de-risking capital from public or philanthropic sources, these projects could become highly attractive to the private sector, paving the way for a robust and sustainable BESS market in India.
What is your outlook for BESS in the near to medium term?
A recent report by CareEdge Ratings reveals a transformative phase in India’s energy storage sector, propelled by revised government regulations such as renewable purchase obligations and energy storage obligations. Projections indicate a surge in ESS demand from 12 GW in FY24 to 70 GW by FY30, aligning with India’s aim of having 500 GW of non-traditional fuel-based capacity by 2030. The report emphasises pumped storage projects and BESS as pivotal in this transition.
In India, the successful deployment of BESS faces a significant financial hurdle. There exists a notable gap between the costs associated with implementing BESS and the value it can provide through existing regulatory mechanisms. This disparity has hindered the development of market-based solutions for BESS. In light of this challenge, the introduction of viability gap funding (VGF) has emerged as a crucial tool to address the financing issues confronting the sector. VGF serves as a means to bridge the financial divide, facilitating the realisation of BESS projects by supplementing the shortfall in financial viability.
What are the top priorities of GEAPP in the near to medium term?
GEAPP is committed to supporting the expansion of India’s BESS market, facilitating the rapid strengthening of the national grid. Our aim is to mobilise technical assistance and concessional capital to drive approximately 1 GW of BESS projects by 2026. We are currently engaging in discussions with several state discoms to assist them in implementing top-tier BESS tenders, ensuring competitive pricing for BESS services. Furthermore, we are crafting a “Post Commissioning Support Package” for pioneering discoms, empowering them to efficiently and safely utilise BESS capacity while maximising commercial value through cutting-edge data tools and software.