India has an installed generation capacity of 344,002 MW in a constrained grid (as on 31 March 2018) and a target of 175,000 MW installed renewable capacity by 2022, which is projected to be around 40% of the total installed capacity (around 437,500 MW). In this context, as commercially viable energy storage inches closer to reality, we are entering a disruptive phase which can redefine how evacuation and supply of power is undertaken in India over decades.
The Ministry of Power has recently classified battery storage as a service, which is timely and will boost investment in this area. The total energy storage market in India is expected to grow from 4.4 GW in 2015 to 70 GW (valued roughly at US$3.32 billion) by 2022. Reports suggest that 300,000 jobs in the clean energy and storage sector will be created over the next five years. It is estimated that energy storage devices manufacturing could attract investments of US$3 billion-6 billion by 2022. It is projected that solar power systems with energy storage could replace existing diesel generators and save up to ₹5 per unit (US$0.076) for industrial and commercial consumers.
The idea of commercially viable battery storage has long been seen as utopian by law makers, planners, courts and utilities. Growth in this market will depend on how quickly technology improves to become commercially feasible; how utilities gear up for and integrate this opportunity in their value-chain; and how investors and lenders evaluate and participate in the opportunity. The legal, economic, policy and regulatory framework governing energy storage and its integration with the current industry can have a meaningful impact. Some key areas for a framework that strikes a balance between innovation and investments, while securing integration of storage in real-time grid operation and load/demand planning criteria, are:
Variable tariffs: Nuanced tariff structures which factor in variables such as norms for differential technological realities instead of a uniform tariff, with an incentive linked to efficiency gains.
Preserving and phasing out capital investment: Energy storage systems are expensive and require significant upfront investment. Adequate fiscal incentives and suitable subsidies would pave the way for early adoption and implementation of this technology. In fast evolving technologies it is important is to ensure continued viability of existing investments while encouraging innovation through suitable financial instruments, cost recognition and servicing.
Data and new technologies: Market participants need access to detailed data that could allow them to identify and prioritize customers for whom storage is profitable. Given the complexity of energy storage, deployment is more likely to follow a push rather than a pull model, favouring entrepreneurial companies that find creative ways to access and use these data. A nodal agency should be designated and tasked with the responsibility of preparing and disseminating data at periodic intervals to stakeholders and consumers in a transparent manner.
Indigenous manufacturing of batteries: Policy should encourage domestic manufacturing as per prescribed standards, with the objective of India becoming a major global battery supplier on competitive terms.
Energy efficiency market deepening: Policy measures should recognize the energy savings from battery storage and develop a market for trading of such savings in an economically viable manner.
Research and development: To encourage domestic manufacturing by tapping the full market potential, it is important to establish well-funded and equipped R&D centres for new and advanced battery technologies. Government, investors and other stakeholders could pool R&D resources to focus on basic research to keep the Indian battery industry at the cutting edge of innovation.
Energy efficiency and renewable purchase obligations: Besides boosting the energy efficiency and renewable energy markets, strictly enforcing such obligations would ultimately tie in with India’s international environmental commitments.
The decision to implement battery storage is not straightforward. It is important to develop a framework which builds on the synergies between renewables and battery deployment. This can be done only if the policy directive is uniform, clear and unambiguous. Regulators and policy makers must protect existing investments in the renewables sector while developing a framework conducive to synergies between renewables and energy storage. The government can set the tone for such policy announcements.
Amit Kapur is the senior partner of J. Sagar Associates and works out of the firm’s New Delhi office. Vishnu Sudarsan is a partner in the Gurugram office.
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