The Time for Battery Storage & Green Hydrogen Is Here, Says IEEFA Note

A new briefing note from the Institute for Energy Economics and Financial Analysis (IEEFA) states that battery storage and green hydrogen will be vital to India’s energy transition goals, especially the goal of 450 GW of renewables by 2030.

“Grid-scale energy storage technologies will play a critical role in India’s decarbonisation journey, helping to integrate the 450 gigawatts (GW) of variable renewable energy capacity targeted by 2030 into the grid,” says the note’s author IEEFA energy finance analyst Kashish Shah.

By pushing for Battery Energy Storage Systems (BESS) market through production-linked incentive schemes and big battery tenders, the government is doing the right things at the right time.

Shah predicts that the Indian battery market could ramp up quickly, seeing how major conglomerates like Reliance have moved in with not just big announcements, but action on the ground in the form of global acquisitions, like that of Norway’s REC Group.

The note states that globally the cost of battery storage has reduced dramatically – from US$1,100/kWh in 2011 for a standalone lithium-ion battery set-up, the price is projected to drop to US$58/kWh by 2030. (Existing market prices are in the range of $150-200/kWh)

The note cites Tata Power’s 10MW/10MWh (1-hour storage) battery in its Delhi distribution network,  currently the only grid-scale battery operating in India. The company’s upcoming storage project in Ladakh – comprising 50MWh of storage capacity co-located with 50MW of solar capacity – will be India’s largest battery.

The involvement of credible government-owned counter parties, IEEFA says, is vital to enabling capital deployment for battery storage. State-owned entities, Shah observes, have also now come into the fold for facilitating grid-scale battery storage development, citing the Solar Energy Corporation of India (SECI) and NTPC calling for tenders to develop 2,000MWh and 1,000MWh of battery storage capacity, respectively, having built strong track records as credible counter parties by developing renewable energy capacity of more than 40GW.

In another policy development, the Central Electricity Regulatory Authority (CERC) aims to bring battery storage and pumped hydro storage (PHS) into the ambit of the frequency control and ancillary services (FCAS) market. This would open up additional revenue streams for storage, helping build the market faster and further.

Building the green hydrogen value chain

On Green Hydrogen, be it steel giant ArcelorMittal’s plans to build 4.5GW of solar capacity in Rajasthan and green hydrogen production capacity backed by solar and wind in Gujarat or  ACME Solar’s commissioning of the world’s first commercial pilot of an integrated green hydrogen and green ammonia production facility in Rajasthan, the note is optimistic of faster adoption. A National Hydrogen mission, perhaps the clearest indicator of government intent has also been announced and strengthened with grants in the last budget.

Reliance has also recently entered a strategic tie-up with an electrolyser developer, where costs are expected to drop faster with increased investments. PSU units NTPC and GAIL have also announced a 5 MW and 10 MW electrolyser plants soon.

Government plans to implement a green hydrogen consumption obligation (GHCO) mechanism in fertiliser production and petroleum refining finds a mention in the note. Much like the Renewable Purchase Obligation (RPO) for power consumers, GHCO would also help create market demand for Hydrogen.

While we believe Green Hydrogen development is possibly key to help truly energy intensive sectors like metallurgy, chemicals and more reduce their carbon footprint, it will need a much more concerted global effort and cooperation to make it a reality. Mandating use, even before Hydrogen costs are at a level that is competitive with fossil fuels, risks creating resistance, especially if competing markets do not have the same rules and obligations. Higher prices to end consumers is also a non starter, if we consider the sharp rebound in fossil fuel consumption in markets where alternatives simply don’t exist or are beyond the reach of most.