2018-11-15
INDIA'S STORAGE OPPORTUNITY

A recent study has claimed that India would overtake China by a wide margin to become the world's leader in renewable energy by 2050. This transformation represents $1.6 trillion opportunity, where solar and wind will attract the highest share of investment over the next three decades. Yet, despite all the aggressive expansion that is either ongoing or forecast, scant attention was paid to the highly critical area of energy storage. But that might just be about to change.

It takes a while to reach Rohini Phase-3, anywhere from Delhi. It's a semi-rural settlement with close proximity to the State of Haryana, whose border lies a mere 15 km away. Since January 2018, the construction has been underway on India's first utility-scale 10 MW energy storage system at a substation operated by Tata Power Delhi Distribution (Tata Power-DDL). Likely to be commissioned by December, the solution will deliver better peak load management, add system flexibility and enhance reliability for more than seven million electricity consumers in the Delhi National Capital Region (Delhi NCR).

When POWER TODAY sought comments from Praveer Sinha, Chief Executive Officer and Managing Director, Tata Power, on the project earlier this year, he drew up an interesting analogy, 'Today, the electrical grid is becoming very unstable. Much electronic equipment is coming in and that, per se, leads to reactive power and harmonics. It is, therefore, necessary that we come up with edge-of-the-grid solutions to prevent its collapse. This absolutely new solution is the Tesla of power distribution and will ensure the reliability and stability of the grid.'

Claims Manish Kumar, Managing Director, The AES, 'We firmly believe that the fundamentals are there for the need for the energy storage on the Indian grid. We think of this as a right-sized demonstration project to make a concrete and material benefit to the system. We have installed and deployed similar projects in 10 countries and believe that not only will it be a market opener, but also be the first step in making grid-scale energy storage a reality in India.'

Fluence, an energy storage technology and services company owned by Siemens and AES, will supply its advanced technology platform for the project. AES and Mitsubishi will jointly own the advanced storage solution.

India outlook

According to Bloomberg New Energy Finance's (BNEF's) New Energy Outlook 2018 report, India will supersede China as the world's largest producer of renewable energy by 2050 on the back of a higher installed renewable energy capacity. Consequently, renewables are expected to account for 75 percent of electricity in India compared to 62 percent in China by that year.

Opines Shantanu Jaiswal, Head of India Research, Bloomberg NEF, 'India's growing power needs and the transition towards a cleaner power system till 2050 present a $1.6 trillion opportunity in the power generation segment alone. Solar and wind technologies will provide the lion's share of electricity generated and thus attract an overwhelmingly large share of the investments as well.'

It is on account of such bullish projections and the challenges of balancing the variability of the renewable energy sources that AES' Kumar sees a huge opportunity for storage projects in India. 'Cloud cover and variability in wind will add to a lot of balancing problems on the grid. We see a strong fundamental need that storage will play in balancing out the variability as well as support the integration of such large amounts of renewable energy into the grid,'he emphasizes.

To add to this, there is the very ambitious programme of the federal government to have at least 30 percent of the vehicles plying on the country's roads as all-electric by 2030. Therefore, the addition of a substantial number of commercial and passenger vehicles over the next decade is going to put further pressure on the electrical grid.

Opines Sinha, 'How do you ensure that you provide such vehicles with a consistent supply of power? Also, many of those vehicles will have to get charged very fast. It will mean that more current will have to flow through the network. Therefore, our basic objective is that energy storage will help us to meet any challenges that we face as a network operator.'But that's just the tip of the iceberg.

Urgency for the energy storehouse

Given the tremendous growth opportunity inherent in the India renewables story, experts point out that the country's needs to start planning proactively for a commensurate expansion in the energy storage segment. According to the figures from India Energy Storage Alliance (IESA), the country has the capacity to integrate over 300 GWh of energy storage between 2018-25. 'This includes not only existing applications such as backup power but also newer applications like the wind and solar integration, frequency regulation, peak management, transmission and distribution deferral, diesel replacement and electric vehicles,'surmises Dr. Rahul Walawalkar, Executive Director, India Energy Storage Alliance (IESA). In 2017, India crossed 2 GWh of deployment of advanced energy storage solutions with contribution from electric rickshaws, telecom towers, and other distributed systems.

A 2017 joint study by the federal government think tank, NITI Aayog and Rocky Mountain Institute titled India's Energy Storage Mission: A Make-in-India Opportunity for Globally Competitive Battery Manufacturing indicates that India could represent more than one-third of the global EV battery demand by 2030, if the country meets its goals for a rapid transition to shared, connected and electric mobility. The report said that India's EV mission could particularly help drive down global battery prices by as much as 16 percent to $60 per kWh. 'Given the projected scale of its domestic market, India could support global-scale manufacturing facilities and eventually become an export hub for battery production, predicts the report.

The country's largest passenger car maker, Maruti Suzuki, has firmed up plans to invest Rs 12 billion in lithium-ion battery plant for electric and hybrid vehicles in Hansalpur, Gujarat. The facility is expected to become operational from 2020. This car maker is reportedly scouting for a supplier of the rare Earth mineral to the plant.

Dheeraj Chawla, Business Development Head, Energy Storage Solutions, Delta Electronics India believes, 'India is on the cusp of a revolution in energy storage owing to the developments in the battery energy storage market. By developing battery manufacturing expertise and scaling its domestic production capacity for Li-ion batteries, India can build a durable economic advantage in this key sector.'

Delta is among the Indian companies that are in the process of establishing facilities for developing Li-ion battery packs locally.

It is also mentioned that every Li-ion battery purchased would contribute to a reduction in the oil imports for many years to come, thereby restricting India's exposure to oil price shocks. Amid the rise in crude oil prices, the country's import bill of the commodity is estimated to surge by 20 percent to $105 billion for the 2018-19 fiscal, a Ministry of Petroleum and Natural Gas report had stated earlier this year.

But there is a catch. India's production of rare earth minerals like lithium and cobalt, which are essential components in storage batteries, is negligible. Bolivia, known to have the largest reserves of lithium, has offered to sign a Preferential Trade Agreement (PTA) with India. The agreement would allow India preferential access to the South American nation's lithium at lower tariffs and other favorable conditions. However, this might also mean that, as is the case with crude oil imports, the country's energy import dependence would continue. The industry, therefore, suggests that not only must the federal government expedite bilateral agreements with lithium and cobalt-rich nations but also encourage their exploration within India.

Additionally, IESA's Walawalkar suggests, 'Apart from Li-ion technology, India must look into other emerging technologies like flow, sodium-air, zinc-air, and aluminum-air batteries.'IESA, for its part, seeks to promote India as a global hub for R&D and manufacturing of advanced energy storage technologies by 2022. However, in order to achieve that goal, the country needs to target a minimum 10 GWh of manufacturing capacity by 2022 and 50 GWh by 2025.

Yet, notwithstanding the supply side issues as far as certain rare Earth materials are concerned, BNEF's Jaiswal says that it wouldn't have much of an impact on the growth prospects of India's renewable energy industry and storage solutions. 'We have supply and demand outlooks for both these metals as well as others such as nickel, graphite, etc. Although we believe there could be supply bottlenecks in the near term, we don't believe it's an issue in the longer term,'he concludes.

On an immediate basis, it is the cost of batteries that are of primary concern to the industry. Delta's Chawla sums up the situation in the words, 'The import duties and taxes are high and end driving up the price points beyond the level of adaptation. Owing to the high capex, customers tend to defer their decisions.'

Saurabh Srivastava, President, Marketing and Product Strategy, Eastman Auto & Power reckons, 'The need for transparent price signal for electricity that values the peaking power and flexibility is the main policy intervention that is required.'He strongly recommends removal of certain barriers such as the high Goods and Services Tax (GST), which is 18 percent on Li-ion batteries versus 5 percent on solar panels and reduction in import duties to help equipment manufacturers.

Anshul Gupta, Director, Okaya Power says, 'Today, the biggest challenge before manufacturers of storage solutions in India is that since they are unable to take full benefit of the economies of scale most operate at well below their full capacity.'He goes on to cite unavailability of low-interest loans for the segment and cheap imports among the major factors that are seen as inhibiting the growth of the segment.

The industry has largely welcomed the recent tweaking of GST rates for Li-ion batteries, which were reduced from the previous 28 percent to 18 percent and electric vehicles (EVs) from 28 percent to 12 percent. According to the industry sources, the move could prove to be an important step towards not only providing a long-awaited boost to the energy storage segment but also the development and adoption of EVs.

National energy storage mission

Creation of smart cities, large-scale adoption of solar power and growth in EVs will provide a fillip to the energy storage market in India. Most importantly, as Chawla rightly points out, 'As we are aware, solar power has been a focus for developers and the government for quite some time now and has seen some rapid growth in recent years. For successful implementation of solar power across regions and to ensure power supply throughout the year, one needs to make sure the energy storage infrastructure is well in place across the country.'

Stakeholders like Delta expect the energy storage market to get a major boost with the launch of the National Energy Storage Mission in the current financial year. As proposed by the government think-tank NITI Aayog, a three-stage solution will be adopted to encourage production of batteries in the country. In addition, a more realistic target of 15-20 GWh of grid-connected storage over the next five years has been proposed as the mission's target. The mission will simultaneously focus on costing, R&D, encouragement to small businesses, grid planning for energy storage and other related areas.

Manufacturers like Su-Kam and Eastman feel that the mission's launch would help in not only expanding the market for storage solutions within the country but also contribute to transforming India into a leading energy technology hub. An enthusiastic Sanjeev K Ahuja, Head, Marketing, Su-Kam Power Systems remarks, 'Already a leading producer of the lead-acid batteries, in the next decade, India might also become one of the largest manufacturers of advanced energy storage technologies.'

Almost all are of the view that a clear and comprehensive regulatory framework, extension of additional incentives and tax benefits under the Make in India programme and development of an ecosystem to encourage rapid adoption of renewable energy would go a long way in expanding the scope and potential for storage solutions.

"Manufacturers feel that NESM's launch would help in not only expanding the market for storage solutions but also contribute to transform the country."

"The industry has welcomed the recent tweaking of GST rates for Li-ion batteries from the previous 28 percent to 18 percent and EVs from 28 percent to 12 percent."

Source- Power Today