Storage Subsidies. With or Without Renewables?

The Award of the Nobel Prize in Chemistry to three scientists who have played a key role in the development and commercialisation of Lithium storage batteries, is a true indicator of the critical role of storage today. More so at a large scale now.

The changes happening on the Energy storage subsidy front in the rest of the world, especially the developed world, could be an instructive pointer to the direction its own ambitions need to take, for India. For, while the government has indicated its enthusiasm and financial backing for a 50 GW storage manufacturing capacity, as always, that covers just one end of the challenge. Don’t be surprised if the next level becomes a bottleneck, namely, demand for these batteries that are made in India. So just how should one approach the issue of backing Energy storage?

At one extreme is California in the US, which reacted to the wildfires caused by a creaking power transmission network with the highest ever subsidy for energy storage , for the most vulnerable sections of people in those areas. By passing its first-ever subsidy aimed specifically at bringing more distributed solar and energy storage to people at highest risk from wildfires, by cutting off grid power to them without leaving them at the mercy of the elements, the state has taken a huge step.

The state public utilities commission approved the Self-Generation Incentive Program last month, through which it was passing on storage subsidies till now. Among The $100 million fund will provide $1 per watt for storage, a subsidy that will cover almost the full cost of an option like the Tesla  Powerwall for these affected consumers.  Keep in mind that this is the US state that has gone well beyond national mandates to target 100% carbon free energy by 2045.

In Australia, South Australia state has pioneered the home battery energy system, where it provides a subsidy upto $6000 for battery systems in state homes. Starting at $600 for every Kw of energy storage. Like the California scheme, this particular scheme is also linked to Solar installations, trying to achieve both energy access and lowering carbon intensity with the move. 40,000 homes are targeted to be covered here, making South Australia one of the best storage markets in the word in one shot.

However, battery sector observers aver that both these examples, by linking storage subsidies to solar or even wind generation, hold back on the real possibilities. Some argue that it is time for a stand alone subsidy for storage batteries, thanks to the growing recognition of the role batteries and other storage can play in creating an efficient, affordable and sustainable grid. For India, that is still building out a grid expansion that can handle a higher share of renewables, its a point worth considering. The country’s renewable growth has already been hamstrung, especially in the corporate and industrial, residential rooftop markets by market distortions, be it poor state of discom financials, subsidised power for key segments in different states and general red tape. Thanks to adequate power generation, W time of day pricing coming into its own  rather than load shedding to balance out the grid better, a shift to storage, rather than captive generation, as had been the norm till now. It will also create space for better handling of higher renewables capacity, since the government seems obsessed with a national, central grid as the key supply line, rather than   micro grids and distributed energy options.

Experts worry that linking storage subsidies to solar might lead to inefficiencies, with storage being installed in places where it doesn’t serve as important a role. Or being installed simply for the subsidy, hardly the most efficient use of resources, or best way to contract the carbon footprint of these projects.

In places where taking the national grid   imposes very high last mile costs, there is actually a very strong case for the government to subsidise storage , if it really wants to find the best way to provide power at the same cost to everyone. Doing it right could be the difference between a thriving domestic storage market and a struggling market dependent on just the Electric Vehicles market.  We believe storage, with its critical role in the coming years to accelerate the shift to decarbonise our energy systems,  is too important to be left at the mercy of just the one key sector, ie, transportation.

Published with Permission from Iamrenew.com