2017-10-31
India Takes the First Steps Toward a Utility-Scale Energy Storage Market

The Indian energy storage industry hopes a 28-megawatt-hour battery plant in the Andaman and Nicobar Islands will kick-start a utility-scale market that has been slow to emerge.

“This will help open up opportunities for such hybrid projects in India,” said Dr. Rahul Walawalkar, executive director of the India Energy Storage Alliance (IESA), after Indian EPC provider Mahindra Susten this month won the project tendered by state-owned coal mining company NLC India.

“With the development of a local ecosystem and skills training, we are confident that solar and storage will continue to have accelerated adoption in India in coming years,” Walawalkar said. “This should also help companies that are considering setting up manufacturing in India.”

IESA has a vision of making India a global advanced energy storage systems manufacturing hub by 2020, he said. Given India’s track record on utility-scale energy storage, the aim is ambitious, to say the least.

Prior to the Andaman and Nicobar project, the Solar Energy Corporation of India (SECI) and NTPC, India’s largest power utility, had already launched three other utility-scale energy storage tenders in the country.

However, “all these tenders, with aggregate capacity of 35 megawatt-hours, have been scrapped without any reasons being given,” noted analyst firm Bridge to India in a blog post

“Our view is that storage will need three [to] four years of techno-commercial advancements before finding scale in India,” wrote the organization. 

The lack of progress on utility-scale storage in one of the most important renewable energy markets in the world is due to a mix of pricing challenges and lack of technical expertise, according to Bridge to India.

With solar prices as low as 65 cents per watt in India, it is cheaper for tendering authorities such as the SECI to build out extra PV and curtail it to balance supply and demand. 

And Bridge to India pointed to the disparity in pricing offers in the NLC India tender as evidence of “inconsistent understanding of technical specification” in the deployment of storage assets.

The analyst firm said quotes for the engineering, procurement and construction of the NLC India plant ranged from INR 3.42 billion (USD $53 million), from solar player Hero, to INR 1.79 billion ($28 million) from Mahindra Susten.

The total value of the contract, according to a statement posted by Mahindra Susten, was INR 2.89 billion ($44 million), said to be 38 percent below government estimates.

The high cost of electricity in Andaman and Nicobar, a group of islands in the Bay of Bengal with a population of 400,000, helped make the tender successful. Andaman and Nicobar’s aggregate peak demand of 67 megawatts is mostly served by gensets firing on diesel at a price of INR 15 ($0.23) per kilowatt-hour.

“Replacing them with integrated [solar-plus-storage] plants is highly desirable from an economic and environmental perspective,” said Bridge to India. “High cost of storage is not a deterrent because of the very high cost of diesel.”

It should be noted that SECI and NTPC targeted Andaman and Nicobar with one of their failed tender attempts; the others were in Andhra Pradesh and Karnataka.

Nevertheless, there are indications that demand for solar-plus-storage projects increased by the time the NLC India tender came around. According to the Mahindra Susten statement, 10 companies pitched in.

Bridge to India listed the solar firms Hero, Ujaas and Sterling & Wilson alongside Mahindra Susten, as well as the storage companies Exide and Bharat Heavy Electricals.

The NLC India project, which is due for commissioning in April 2019, was widely reported as being the first utility-scale energy storage plant in the country. But it is at least the second. As previously reported by GTM, AES is working on a 10-megawatt system.

The project is “in late-stage development,” said a source at AES, with construction yet to start.

Source- Greentech Media