India’s RE Storage On Course For 6 GW By Fiscal 2028: CRISIL

India's RE Storage Can Reach 6 GW By Fiscal 2028: CRISIL

CRISIL Ratings estimates that India’s renewable energy (RE) storage capacity could surge to 6 GW by fiscal 2028, up from less than 1 GW operational as of March 2024. It attributes this prospective growth to the increase in the pipeline of projects under implementation and an expected healthy pace of auctions. It also noted that such an increase is crucial to sustainably absorb the rising share of RE in the country’s overall power generation mix. India’s CEA estimates that the country will need 6.5 GW of storage for a grid that is 20% renewable energy, especially solar and wind.

CRISIL Ratings’ recent report stated that, despite slow progress on project implementation, the government’s push to develop RE power and the tariffs for round-the-clock renewable energy discovered in the last two fiscal years, being comparable with other sources of round-the-clock power, improve confidence around adoption.

The research organization said, “Storage is becoming crucial with the rising share of RE, both solar and wind, within the overall power generation mix. “

CRISIL Predicts Lower Thermal Share In Generation Next Fiscal

Also Read

It further noted that to address this issue, the government is working on developing the necessary infrastructure through standalone storage systems (such as pumped hydro or battery storage systems) and storage-linked projects that combine RE generation with storage.

The research pointed out, “The auctions of such projects have been ramped up. About 3 GW of standalone storage and approximately 10 GW of storage-linked projects with ~2 GW of storage were auctioned in the past two fiscal years (versus less than 1 GW previously), resulting in a healthy pipeline of ~6 GW of storage as of May 2024. Development of at least this much storage capacity would be required to sustainably increase the proportion of RE power to 20-22% in the overall power generation mix, according to government estimates.”

Manish Gupta, Senior Director of CRISIL Ratings, said, ““However, progress on implementation has been tardy. Slow adoption by state distribution companies (discoms) has been a key deterrent to implementation — 60- 65% of such projects had not got their power purchase agreements (PPAs) executed until May 2024.”

Govt VGF Scheme Can Support 36% Of Offshore Project Cost, Says CRISIL

Also Read

A major reason for the low traction is the higher tariff (Rs 4.3-5.5 per unit) on these projects compared with other RE bids (Rs 2.6-3.2 per unit) due to the additional cost of storage.

The government aims to increase RE capacity to 450 GW by 2030, up from 130 GW as of March 2024. To promote this, Renewable Purchase Obligations (RPOs) have been stipulated for DISCOMs. They must increase the share of RE power from approximately 25% at present to 39% by fiscal 2028. This means DISCOMs will need to buy more RE power, and as its penetration increases, the focus will sharpen on storage, which is essential for grid balancing.

Ankit Hakhu, Director of CRISIL Ratings, said, “Though tariffs of projects with storage (Rs 4.3-5.5 per unit) are above the typical renewable bids (Rs 2.6-3.2 per unit), they are comparable with that of other round-the-clock sources, including tariffs discovered through medium-term power purchase agreements of coal thermal plants (~Rs 5 per unit in fiscal 2024). This further provides confidence on the increase in traction of the signing of PPAs“

The Top 5: India’s 10 GW Club for RE Developers is Set to Expand Significantly by 2025

Also Read

That said, the 6 GW projection remains sensitive to project cost estimates and timely implementation. A more-than-anticipated rise in cost or unavailability of key raw materials (such as solar modules and batteries) can impact viability, as tariffs are fixed and do not provide a pass-through.

Additionally, technological risks (such as estimates of water evaporation rate for pumped hydro projects and degradation and discharge rate for batteries) can also impact the implementation and operation of these projects. This is because there is a limited track record of large-scale development of such projects in India.