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Achieving climate goals and renewable targets first requires solving the storage conundrum

India will have to tailor its battery storage adaptation to its own needs.

India will have to tailor its battery storage adaptation to its own needs. Image: Unsplash/Karsten Würth

Sumant Sinha
Chairman and Chief Executive Officer, ReNew
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  • India is racing to meet its 2030 climate goal by boosting renewable energy generation, requiring flexible battery storage systems to ensure simultaneous stability.
  • Its renewable energy ambitions will, in tandem, create jobs and boost the economy.
  • Challenges include keeping up with the rapid expansion of solar and wind assets; overcoming these will involve getting raw materials right, encouraging investment by recognizing batteries’ various use cases, and overcoming the burden of heavy taxes.

India is currently looking to rapidly boost its renewable energy (RE) generation from the current 12-13% to over a third of total generation to meet its climate goals by 2030. However, while doing so, it must actively plan for the vagaries of the natural energy sources to ensure stability and flexibility in its expanding national grid.

This planning must include flexible storage systems that absorb, store and then reinject electricity into the grid according to requirements. The case for this is urgent and massive: In less than nine years from now, India will be adding an unprecedented ~300 GW of renewables to meet its 2030 climate goal of 500 GW of non-fossil fuel electricity capacity.

Integrating adaptability and flexibility in battery storage systems

The United States government’s National Renewable Energy Laboratory, in a report about energy storage in South Asia, stated: “Developing energy storage is one key avenue for increasing India’s power system flexibility and its share of renewables and ultimately enabling India’s decarbonization.”

India will have to tailor its battery storage adaptation to its own needs but will not have to reinvent the wheel. Already, storage in markets such as the United States and the United Kingdom has helped in integrating adaptability and flexibility for their grids.

Adding to the attractiveness of storage, besides its integrality to the RE rollout, is the sharp decline in costs, set to dip further.

Battery storage system costs continue to fall.
Battery storage system costs continue to fall. Image: BNEF

India’s NITI Aayog, the nodal planning agency for the economy, expects the country’s storage market to reach more than 1,000 GWh by 2030 from a very small base today.

The push to reach the total 1,000 GWh capacity deployment will mean thousands of jobs in manufacturing and construction for storage and storage-related projects, which helps the overall economy.

But India has to overcome some challenges to ensure storage keeps up with the rapid expansion of solar and wind assets.

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Current challenges

Getting raw materials right

The country and its policymakers will have to ensure the availability of raw materials such as cobalt and lithium to ensure domestic manufacturing takes off for battery storage. Otherwise, India will always be dependent on other countries to fuel such a critical transition, which is risky, as recent geopolitical events have shown, and prohibitively supplier driven and, hence, expensive at critical times.

Valuation for viability

While the need for storage is obvious, it is imperative to adequately recognize – and separately remunerate – the multiple use cases of battery, such as frequency management services, arbitrage from market operations and controlling the variability from RE generation.

It is, therefore, critical to creating incentives and enabling policies to make investments in storage viable. A few early projects will set the ball rolling, as we have seen in the Australian and the California energy markets.

Too taxing

Another barrier is that batteries are currently heavily taxed with duties and taxes at over 40%, undermining their viability and keeping more early investors away. This challenge intensifies since storage assets do not generate any power of their own.

Resolving challenges

Internal focus

To build its domestic storage ecosystem to support its historic clean energy transition, India needs to push the development of alternate storage technologies such as flow batteries, sodium ion, sodium sulphur, and compressed air energy systems. These technologies use metals or minerals like sodium, sulphur and zinc and are significantly present in India.

For instance, storage technologies such as sodium ion are used for short-to-mid duration storage and have the potential to become cheaper than lithium-based technology in the long run. For addressing longer duration applications, which typically require four-to-six hours of backup, sodium sulphur batteries can be used. Even higher duration backup can be provided by compressed energy storage – longer than six hours.

Relaxation in tax and duty incidence

Just as concessions/exemptions on customs duties and excise for capital equipment helped build a strong demand pipeline initially for RE generation, this could similarly work for battery storage. The government may consider putting energy storage systems in a lower GST bracket (5%) and doing away with import duties in the initial few years, which can be gradually increased as India becomes more self-reliant in the manufacturing of batteries.

Additionally, for the initial few projects, it will be worth considering Viability Gap Funding to attract investors and grid operators.

Get battery storage markets right

The effective use of storage lies with generation projects and at all levels of the power ecosystem, including transmission and distribution. Wherever battery storage is deployed, the key lies in using the complete range of the value stack of applications for maximum asset utilization. It is, therefore, critical that the right policies are formulated for developing multiple application cases for energy storage and enabling participative markets for them.

Battery storage and expansion of renewables will have to move in sync with India’s clean energy dreams, enabling the success of our energy transition.

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May 21, 2024

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