Green Energy, EVs To Drive India’s GDP Growth, Estimates EY Report

Ernest and Young (EY), in its latest report, said that the green energy industries and electric vehicles could prove to be triggering factors, driving India’s total GDP growth by 2047-48. The report states that this can also pave the way for India’s transition to a developed economy with a rise in the per capita income. 

The EY report projected that India’s GDP is likely to touch USD $26 trillion in the market exchange rate terms by 2047-48. It’s expected to achieve per capita income that can exceed USD $15,000 by 2047-48, putting it among the ranks of developed economies.

Meanwhile, in the medium term, India would remain the fastest-growing large economy. The EY report mentioned, “Sectors that could be a part of it to be electric vehicles, new energy-related products like solar panels, advanced chemical cell batteries, green hydrogen, electrolyzers, drones, among others. Whichever country establishes a competitive manufacturing eco-system in these products would have a significant advantage in the foreseeable future.”

Energy Storage

It identified energy storage as the missing link. The EY report said, “Owing to the increasing share of variable renewable energy that will require storage, India is expected to emerge as the third largest country in energy storage installation by 2040. Energy storage is expected to be a 230-300 GWh opportunity, an investment of US$~45-55b across Battery Energy Storage Systems (BESS) and Pumped Hydro Storage Projects (PSP).”

It mentioned that government policies, incentives, interventions, and regulations are driving demand for energy storage in the South Asian country. It includes two standalone ESS tenders that SECI and NTPC recently issued with a combined storage capacity of 1GW/4GWh74. The report also cited the Energy storage obligation (ESO) on discoms and other obligated entities as a push factor. The government notified an ESO of 1-4% of the total energy consumption under ESO in a phase-wise manner till 2030. 

Policies Undertaken To De-Risk Supply Chain

The EY report also mentioned, “For de-risking supply chains to facilitate manufacturing, the Government of India (GoI) has announced various PLI schemes and policies to facilitate domestic manufacturing: INR 195b76 (US$2.4b) allocated for photovoltaic (PV) module production to drive volumes and economies of scale for meeting desired demand and at lower costs. INR 181b77 (US$ 2.3b) for Advanced Chemistry Cells (ACC) and INR 100b78 (US$1.3b) for Faster Adoption of Electric Vehicle (FAME) to enable India’s leapfrog from a traditional fossil fuel-based transportation system to an alternative, and more efficient Electric Vehicle (EV) based system. INR 174.9b (US$ 2.2b) for strategic Intervention for the Green Hydrogen Transition Programme, an incentive scheme to target the domestic manufacturing of electrolyzers and production of green hydrogen.” 

Battery manufacturing in India has been restricted to assembling packs from imported cells in a fragmented market with many small players. The report said that with the PLI scheme for Advanced Chemistry Cell (ACC) Batteries, end-to-end manufacturing of batteries at giga scale (>5GWh) is picking up, as large players have now started setting up facilities, with announced plans to scale to ~140-150 GWh of manufacturing capacity (including battery demand for stationary applications and electric mobility). While large players have clear advantages in manufacturing BESS, value chain opportunities across project development, operations and maintenance will emerge for several people like RE project developers, public or private oil & gas/energy companies and technology players to participate in the growing energy storage market.

It added, “This is evident from the choice of focus sectors, i.e., semi-conductors, electric vehicles, solar panels, drones, etc. If India develops competitive and large-scale manufacturing capacities for these products, it will reduce the economy’s vulnerability while also providing opportunities for exports.”

It stated an example of schemes, “For instance, PLI schemes for solar panels and import duties or restrictions favor local manufacturing. Aggregated project tenders by large, government-backed organizations such as SECI de-risk projects and enable capacity additions at scale. Corporate commitments to their sustainability targets are driving further growth by increasing renewable energy demand and introducing innovative business models for renewable energy procurement. There is a significant interest and activity of PE funding in this space with established enterprises and supporting young entrepreneurs through large-sized investment platforms.”