Changing Dynamics: Indian Green Firms Shift Focus On Energy Storage

In March 2022, India’s leading renewable energy company Adani Green Energy Limited (AGEL) collaborated with another Indian leading player in the energy storage systems–Greenko. The partnership was to seek the Hyderabad-based company’s assistance in getting Round-The-Clock (RTC) power for AGEL’s projects through Greenko’s PSP assets. PSPs are often termed as giant batteries which can storage variable renewable energy (VRE). It can store VRE for longer durations, beyond six hours and produce renewable power instantly when required like at night or during peak demand. This can help in maintaining the grid stability.

Earlier in June 2023, AGEL was also seen participating in a pre-bid consultation meetings in West Bengal for a tender for the Bandu PSP in the region, hinting at their attempt to venture into the age-long storage technology-pumped hydro storage systems (PHS) or Pumped Storage Projects (PSPs). However, the picture became clearer when Andhra Pradesh cleared the proposal of AGEL for its maiden 500 MW PSP project in the state. Adani Green has now started works for its PSP in Andhra Pradesh at Chitravathi river. 

With its first PSP project in hand, AGEL has announced plans for 5GW capacity for PHP projects by 2030, upgrading its overall RE target to 50 GW by then. Besides opting for Andhra, Adani Green has also earmarked Maharashtra, Telangana and Tamil Nadu for its next PSPs.  The AGEL management attributed this to the lower cost of operations of PSPs compared to its popular alternative Battery Energy Storage Systems (BESS), the surge in tenders for PSPs and others. 

“Pumped Hydro Storage, a mature and proven technology, emerges as a robust solution. We have already kicked off construction work for the first 500 MW project in Andhra Pradesh.100% of this capacity is already fully funded from both a debt and equity perspective,” Sagar Adani, Executive Director of AGEL said in its latest investors call. 

He also added that Pumped Hydro Storage is significantly cheaper to build compared to batteries, moving them to consider it a serious option before it. 

The management pegged the capital cost for PSP between Rs 4.5-Rs 5 crore per MW. At the same time the capital cost as per the firm for solar projects stood at Rs 5 crore per MW and for wind projects it was around Rs 6.5 crore/MW. 

Energy Firms Jump In

However, Adani Green is hardly the only green energy company  in the energy storage market. Companies like Greenko and JSW Energy have also relied on PSPs to boost their energy storage portfolio, while others such as ReNew are seeking options in BESS. 

Telangana-based Greenko which has a total renewable portfolio of 7.5 GW said that with its energy storage capacities, it’s now offering 100 Gwh of storage per day, almost all from PSPs. It said that 6.16 GW of its storage capacity is now under construction. For example, last year it laid the foundation of India’s largest PHS project at Neemuch in Madhya Pradesh with a total capacity of 1920 MW.

JSW Energy, one of the new entrants into the renewable sector has received LOA/LOI for 3.4 GWh of ESS projects which included 2.4 GWh of PSPs and 1 GWh of BESS projects from a tender through the Solar Energy Corporation of India (SECI). However, researchers claim that despite the increased participation India needs more attention for PSPs.

 

“The country plans to add 500 MW of non-fossil capacity by 2030, out of which majority shares will be from variable RE sources such as solar and wind. To maintain grid stability, we need storage systems such as PSPs. Although Greenko, Tata Power, and Adani have entered the market, we will need more private players in the future as India has an on-river PSP potential of 103 GW,” Dr Ammu Susanna Jacob, Research Scientist at CSTEP told Saur Energy. India’s 2023 National Electricity Plan by the Central Electricity Authority (CEA) has estimated the need for 486 GW of variable renewables (solar and wind).

The high penetration of variable and intermittent renewable energy (RE) poses challenges such as grid balancing and underutilization of the transmission system. As companies demand firm and dispatchable RE (FDRE) power, this will be obtained by transforming the variable RE into FDRE through integration with energy storage systems (ESSs). 

Jacob said that policy clarity from the government with a pro-PSP framework increased investments to the sector. The policy talked about lesser approvals for off-the river PSPs, Viability Gap Funding (VGF) and other proactive measures to help the builders. Although PSPs take higher time period to construct than BESS and also lack the flexibility in terms of movement like BESS.

As per the estimates from the Central Electricity Authority (CEA), India would require 41.7 GW of BESS and 18.9 GW of PSPs by 2029-30. As per the latest statistics from the CEA, India currently has a total operational capacity of 4.74 GW of PSPs. On the other hand 2.7 GW of PSP capacities are under construction and the CEA has prepared DPR for another 2.35 GW of PSPs.

Battery Energy Storage Systems 

While Adani Green, Greenko, JSW Energy and selected private companies in India are set to propel the growth of PSPs, several other companies in India have opted for BESS, even though the dependency on critical minerals like Lithium often makes BESS manufacturing in India a Herculean task.

While the ESS tenders from the central entities like the Solar Energy Corporation of India (SECI) started taking shape from around 2018 with simple solar plus storage tenders, the range of tenders for ESS has increased manifolds in India since then, showing the promptness of the tendering authorities towards boosting the landscape of ESS in India. Several companies like BluPine Energy, Tata Power, JSW, Acme, ReNew, Solarcraft and O2 Power have bid for these BESS tenders and emerged as winners.

According to a recent joint report from IEEFA on utility-scale renewable tenders, in calendar year 2023, India released around 22 GW of standalone ESS tenders (without renewable energy component). Out of this 20 GW of these were PSP tenders. In the ESS segment, SECI and other tendering agencies have experimented with the tendering formats ranging from solar+ESS to RTC tenders, peak power tenders and lately the Firm and Dispatchable Renewable Energy (FDRE) tenders. 

The IEEFA report said that firms like ReNew and ACME have shifted their focus to ESS tenders. It said that from April 2022 to March 2024, renewable energy+ESS accounted for 55%^ and 34% of the entire renewable energy capacities awarded to CME and Renew respectively. The report also said that BluPine Energy had made the most substantial impact among the new entrants in utility-scale tenders. 

BluPine has successfully won two tenders totaling 200 MW, both of which require Energy Storage Systems (ESS).  Ashish Agarwal, Head – Solar & Storage, BluPine Energy told Saur Energy that the company finds standalone ESS tenders more suited to fulfilling grid requirements compared to RTC or FDRE tenders. 

“Installing ESS at the grid level allows for charging and discharging based on real-time grid needs, which provides a more efficient way to manage supply and demand fluctuations. This approach offers greater flexibility and reliability in maintaining grid stability, compared to using ESS to manage fluctuations of individual standalone renewable projects,” he said.

He also added that the Levelised Cost of Energy (LCOE) for PSPs and BESS have become competitive now. “We believe that BESS has already reached a pricing level that can match the Levelized Cost of Energy (LCOE) of Pumped Storage Plants (PSP). Additionally, BESS offers several advantages such as modular size, ease of construction, and speed of deployment. These factors contribute to its commercial viability and make it a competitive option in the energy storage market,” he added. Importantly perhaps, BESS offers much faster response times (fraction of seconds)  as compared to PSPs. 

As per International Forum On Pumped Storage Hydropower, for a 10-hour storage PHP offers one of the lowest effective capital expenditure (CAPEX)/Kw (USD 2,910/kW) of all the ESS technologies. Lower effective cost is attributed to the longer project life of 40-80 years.  

PSPs Vs BESS

As per estimates, PHPs have longer shelf life or around 50-80 years than the conventional BESS which have a shelf life of 7-8 years. Thus PHPs which are well suited for grid-scale storage allow more cycles of power release.  

The Ministry of Power in its PHP guidelines, released in April 2023 admits that even globally PHPs dominate the energy storage systems.  “PSPs provide the necessary scale of storage and have a long service life of more than 40-50 years. This is much more than any other energy storage technology presently available. This also results in a low cost of delivered energy over the life of the projects. PSPs are also non-polluting and are more environmentally friendly’ Pumped Storage Projects account for over 95 percent of installed global energy storage capacity. lt is estimated that pumped hydro projects worldwide store up to 9,000 gigawatt hours (GWh) of electricity worldwide,” the MoP paper read.  

Experts claim that both the ESS technologies are likely to co-exist in India due to the inherent advantages. “In my opinion, BESS and PSPs will coexist serving different needs for energy storage. BESS will most likely serve the 1-6 hour energy storage duration needed, while PSPs serve >6 hours of storage. Some advantages of BESS include short commissioning times (~2 years) and the ability to have multiple revenue streams, including the fast response market (response in milliseconds for frequency control), peak power management, and smoothening of VRE supply, among others. While PSPs take a long time for construction (5-6 years), they have lower per-unit costs and long lifetimes of up to 60 years or more,” Charith Konda, Energy Specialist at IEEFA told Saur Energy. 

Govt’s handholding for ESS 

The Indian government, which is on a trajectory to reach net-zero by 2070 and achieve a capacity of 500 GW from non-fossil sources, has also come out with several policies to promote utility-scale energy storage systems. The government last year issued an order mandating the major renewable energy projects to have ESS for at least five percent of their project.

It also waived of the Inter-State Transmission System (ISTS) charges for 12 years. The Union Cabinet also approved Viability Gap Funding (VGF) for up to 40% of the capital cost for the BESS to boost local manufacturing of energy storage systems. India also imposed Energy Storage Obligations (ESO) to ensure obligated entities add ESS along with renewables. 

Global energy think tanks see a rosy picture of India’s energy storage growth. A recent report by the International Energy Agency (IEA) claimed that by 2030, India’s PSP capacities could reach upto 120 GW. It also said that India is set to become the world’s third largest market for utility-scale batteries by 2030. The IEA report through its estimates claimed that solar plus battery energy storage costs are now more competitive than the new coal plants in India. The IEA report also indicated a steady decline in the LCOE of solar plus BESS in India with time.

          

Challenges for ESS sector in India 

While the PSPs have their own inherent challenges like longer duration of construction, environmental clearances and large investments, BESS batteries are often marred with hurdles like changing geopolitics, fluctuations of prices of critical minerals like Lithium and others. 

Ashish Agarwal from BluPine Energy said that the path to self-reliance in ESS technologies for India largely depends on how quickly the country can ramp up its manufacturing capabilities. In the case of BESS, he said that the scale of manufacturing significantly determines the cost of production. He also talked about new dedicated support from the government.

“India needs to create sufficient demand to justify the establishment of large-scale manufacturing setups. Additionally, the government can introduce policies similar to the Approved List of Models and Manufacturers (ALMM) for batteries, which would support local manufacturers and ensure quality standards. However, it is crucial to strike a balance to avoid excessive curbs that could hinder market dynamics and innovation,” he added. In short, lead to higher prices.

Charith said that the entry of more players into the Indian BESS market is a positive sign. “We certainly see more companies in battery manufacturing in India currently than before. New entrants include Ola Electric, Reliance New Energy, and Waaree Group, among others in addition to traditional battery manufacturers such as Exide and Amara Raja. We will most likely see several other new battery manufacturers entering the market in the future,” he said. 

Moreover, three companies-Reliance New Energy, Ola Electric Mobility and Rajesh Exports have also won the bids for India’s ambitious Production Linked Initiatives (PLI) for producing Advanced Chemistry Cells (ACC) based batteries which have performance equivalent or more than the Lithium-ion batteries. Agarwal (BluPine) said that this scheme could significantly impact both the cost reduction and energy security by boosting local manufacturing capacities and reducing dependence on imports. 

An IEEFA report co-authored by Konda and others said that decline in battery costs can reduce the LCOE and make it competitive to PHPs. It also flags Green Hydrogen as a potential dominant grid-scale ESS technology soon.

“In terms of ESS technology, in the near term, large grid-scale ESS will favour PHS, mainly due to its levelised cost of energy (LCOE). However, with the likely decline in battery prices, BESS may overtake PHS as the most financially viable option to implement grid-scale ESS. In the long term, with green hydrogen-based ESS possibly attaining parity with PHS and BESS, green hydrogen may also become the dominant grid-scale ESS technology,” the IEEFA report said. 

Conclusion

It is evident from the recent rise of tenders from SECI, NTPC to other state entities that the thrust of the government has shifted to boost the growth of energy storage systems in the country to boost grid stability and ensure development of large-scale utility-scale energy storage systems. The country is now also witnessing a transition with a push from the government.

While outside the scope of this article for now, a broader EV adoption also creates opportunities to use these as a crowdsourced storage system, by incentivising users to plug into, and supply to the grid at specific times. Rules on ancillary services linked to energy storage are also evolving, further creating multiple revenue streams for prospective owners, and supporting demand.  

A strong commercial market at corporate and retail level will certainly support the growth of the storage industry, as more and more use cases are found, including for coastal regions and hilly areas.