Tariff of Renewable Plus Storage Tenders now Competing With Thermal

AES Corporation Acquires USA's Largest Permitted Solar Plus Storage Project of 2 GW

In the last one year in India, there has been a growth spurt in storage tender issuance, however, only for a few small tenders, the auctions are successful. In most other tenders, the storage capacity was so high that it leads to infeasible tariffs, and eventually to cancellations of many of these tenders, JMK Research has revealed.

The one significant milestone for the storage sector was achieved last week, with the successful auction of SECI’s 1,200 MW RE plus storage tender with guaranteed peak power supply. In this tender, renewable technology can be a solar system, a wind energy system, or a hybrid system, and storage can include battery energy storage systems, pumped storage systems, mechanical and chemical systems, or combinations thereof.

Greenko won 900 MW capacity, and ReNew Power was awarded 300 MW of projects. Greenko is opting for pumped hydro storage while ReNew is planning Battery Energy Storage System (BESS).

Source: JMK Research and Analytics

As per the tender conditions, Discoms can ask for peak power supply for 9 hours (morning peak 6-9 AM and evening peak from 6 to 12 PM) during the 24 hours of the day. The minimum Energy Storage System (ESS) rated energy capacity installed shall be equal to “X/2” MW, where X is the contracted capacity of the project as per PPA. Therefore, for ReNew, the BESS rated capacity would be 150 MW, while for Greenko pumped hydro storage capacity would be 450 MW.

According to the research analysis, the rates quoted in this auction are very competitive, and the industry is very optimistic about these tenders, which have something new to offer. The weighted average tariff for this tender is even lower than the cost of new thermal power plants where the tariff is in the range of Rs 4.5-6/ unit. With falling battery prices, the cost of peak tariffs is also anticipated to come down significantly in the next few years it added.

As per various industry sources, the current EPC prices of battery storage are in the range of USD 300-320/ kWh and by 2021, the costs are estimated to reduce by 15 -20 percent to fall in the range of USD 250-270/ kWh.

The emergence of storage technology coupled with renewables is the beginning of a new era for the Indian power sector wherein conventional sources would be replaced with stable renewable power technology. Energy storage is also poised to be a shot in the arm for India’s ambitious 2030 renewable energy target of 460 GW. To support this ambitious target, according to Central Electricity Authority (CEA), about 34 GW/ 136 GWh of battery storage is needed to be installed by 2030.

The analysis further added that to give the required impetus to the storage market, now policymakers should also devise policies to benefit all the stakeholders. Presently, there is a lack of clarity about the functional classification of energy storage as it is both a generator and a consumer of electricity. Changes to the existing regulatory framework are required to provide an identity to Energy Storage which is yet to find a mention in the Electricity Act 2003. Also, energy storage should be allowed as an essential regulatory asset for Discoms, which would help them recover costs from its customers.