India ready to embrace Energy Storage Systems

This article is a short analysis of the industry experts on the efforts initiated by the government and the industry to amplify implementation and usage of energy storage systems and storage solutions in India. 

Energy storage is expected to play a key role in India’s power sector. A recent analysis report by US National Renewable Energy Laboratory said India could potentially have a storage capacity of 50 GW to 120 GW by 2030. 

Over the past five years, the concept of energy storage has been definitely gaining visible momentum in India. This is in large part due to the government’s realisation of the need to have better energy security, spinning reserves and a general framework for energy selfsufficiency in India. 

How is the concept of energy storage gaining traction in India? 

The increased momentum of energy storage has also been due to the decrease in prices of Li-ion batteries and an increase in their performance. There are also a lot more sectors in which energy storage systems can be applied. For example, the telecom sector and other data centers have been the largest adopters of Li-ion batteries. On this note, Ketan Chitnis, VP Stationary BU, Nexcharge, said “This is because of their higher cyclic life and higher energy density. They also help to drastically reduce carbon footprint and their weight is less than half that of conventional batteries. Solar rooftops and residential energy storage is also seeing a migration from lead acid batteries to Li-ion ones.” 

Highlighting few latest developments on the energy storage front, Kashish Shah, Research Analyst, Institute for Energy Economics and Financial Analysis (IEEFA) mentioned about Tata Power’s 10MW/10MWh (1-hour storage) battery in its Delhi distribution network that has been the only grid-scale battery currently operating in India. In a recent visit to Tata’s battery storage facility, Delhi’s Power Minister talked about a plan to create a storage capacity of 600MW in Delhi in the form of ‘power banks’. This would be a huge step-up from the existing 10MW/10MWh battery storage capacity. 

“India’s state-owned entities too have now come into the fold for facilitating grid-scale battery storage development. In the last couple of months, the Solar Energy Corporation of India (SECI) and NTPC have rolled out tenders for developing 2,000MWh and 1,000MWh battery storage capacity, respectively”, adds Shah. 

SECI and NTPC have built a strong record for being credible counter parties in the last few years by enabling renewable energy capacity development more than of 40GW. IEEFA deems the involvement of credible government-owned counter parties extremely vital to allow capital deployment in battery storage development. There are also substantial developments on the battery manufacturing front. 

Reportedly, Indian automotive electrical components manufacturer Lucas TVS and U.S.-based 24M Technologies in a joint venture plan to set up a `2,500 crore (US$340m) battery manufacturing plant near Chennai for lithium-ion (Li-ion) battery cells based on SemiSolid platform technology. 

Energy storage solutions suitable for India 

India is an extremely price sensitive market and there are two factors that drive a product’s viability: The economy of a solution and the CAPEX expenditure. The economy of a solution is always addressed by better performance and if you look at any recent market outputs, performance based business models are gaining more traction. People in India would like to pay for the kWh per hour that they use rather than the CAPEX expenditure incurred. “Over the past five years, Liion batteries have had improved life cycles, better performance, and increased safety and efficiency”, says Chitnis. All of this has made for a strong case for financing Li-ion battery-driven storage solutions for a market like India. Also, for those making CAPEX expenditures, insurance cover and other opportunities for financing have opened up. 

Currently, in India, energy storage solutions are being deployed to protect large scale commercial installations in urban locales. While in rural areas, ESS is more limited to residential uses. But overall, the market has experienced the technology and it is ready to embrace ESS. 

Continuing the discussion, Shah adds, “Lithium-ion battery storage system is commercially the most effective storage system to provide fast and accurate grid services across the globe. Currently, these storage systems are capable of providing 1 to 4 hour storage capacity that help in shaving off peak loads store during sunny hours of the day and dispatch during the evening peak load hours).” 

Also, Pumped Hydro Storage (PHS) is a key resource that could provide storage and grid services; although PHS development in India has been very challenging due to various geological, social and commercial reasons.

Challenges in setting up effective energy storage system 

“One of the biggest challenges that remain in the Indian market is the lack of benchmarking of various applications. This leads to customers not having a clear idea of what they want because they haven’t logged in any data in connection to their requirements”, explains Chitnis. For example, solar farms have a minimum energy commitment that they’re required to produce; hence, most plants are oversized so that they can meet this standard minimum. “In the process, they end up generating excess levels of energy during peak cycles that cannot be exported because there is a cap on export. 

“In order to utilise this excess energy, there needs to be an optimised energy storage capacity. However, if customers aren’t aware of benchmarks, then they aren’t sure of what micro level data to collect’ adds Chitnis. Due to this insufficiency of data points, it is hard to design optimised solutions. In developed countries, this benchmarking process has already been done. Thus in India, it is challenging to build optimised solutions and data driven business models. 

On the other side, Shah is of view that “For batteries, India’s lack a domestic value-chain that include manufacturing, value-added services, deployment and recycling. On the policy side, there needs to be a ‘time-of-day’ differentiated price signal for batteries to be commercially viable.”

Policy initiatives for energy storage

Currently, the government has realised that when it comes to economic growth and the GDP, energy independence is a crucially important parameter. On this note, Chitnis feels that energy independence cannot just be born out of producing a lot of energy but instead it has to come from having robust additional pools of energy at our disposal. This realisation has led to the government deploying battery storage solutions in various sectors. 

Also, the government’s latest Production Linked Incentive (PLI) Scheme ‘National Programme on Advanced Chemistry Cell (ACC) Battery Storage’ in order to achieve a manufacturing capacity of 50 GWh of ACC and 5 GWh of “Niche” ACC with an outlay of `18,100 crore is another promising and encouraging announcement. 

The government is also planning to alter the national grid code and there is an upcoming amendment in deviation settlement mechanism (DSM), both will encourage more deployment of battery-driven energy storage solutions. Thus we can anticipate a lot of investments coming through in the future. 

The manufacturing of battery, an important segment of the battery value-chain, is now aided by the government’s production-linked incentive (PLI) scheme. “The scheme is focused at creating battery capacity for electric vehicles (EVs) by incentivising domestic value addition. This would lay foundation for developing other segments of batteries including grid-scale batteries. This will value the speed and accuracy of grid balancing services that batteries and PHS could provide at competitive market prices, allowing a clear revenue stream for the asset owners these storage systems”, Shah higlhights. 

Also similar to solar and wind assets, inter-state transmission charges have been waived off for battery storage and PHS systems commissioned before June 2025. This will allow the storage systems to viably operate to support interstate grid networks. “India’s market potential aided by government’s ambition and policy support are driving a momentum in battery manufacturing in India” adds Shah. 

Future of energy Storage in India 

The future of energy storage in India hinges on its qualifications for the economically viable OPEX model. There is also going to be a lot of investment into R&D. And as more large players jump onto the energy storage market, there will be more resources that go into refining systems technically and refining business models economically. All of this will make the market more organised and there will be better business propositions for customers.