India has committed to the rest of the world that by 2030, 50% of its energy will be from non-traditional fuel sources. This is an ambitious target and the Central Electricity Authority (CEA) has estimated a need of nearly 50GW for storage to enable this target. Bringing such significant volumes of storage, particularly Battery Energy Storage Systems (BESS), can be achieved by overcoming two challenges — India’s current dependence on imports and the cost of storage.

The government’s production-linked incentive (PLI) scheme, with incentives of over ₹18,000 crore, has attracted bids for the set up of 95GW of manufacturing capacity to reduce dependence on imports and the cost of storage. Innovative policies and regulations could unlock this market and lead it to a tipping point where the domestic demand for BESS would make India one of the largest BESS-manufacturing hubs in the world.

India has committed to the rest of the world that by 2030, 50% of its energy will be from non-traditional fuel sources. This is an ambitious target and the Central Electricity Authority (CEA) has estimated a need of nearly 50GW for storage to enable this target. Bringing such significant volumes of storage, particularly Battery Energy Storage Systems (BESS), can be achieved by overcoming two challenges — India’s current dependence on imports and the cost of storage.

The government’s production-linked incentive (PLI) scheme, with incentives of over ₹18,000 crore, has attracted bids for the set up of 95GW of manufacturing capacity to reduce dependence on imports and the cost of storage. Innovative policies and regulations could unlock this market and lead it to a tipping point where the domestic demand for BESS would make India one of the largest BESS-manufacturing hubs in the world.

The high storage demand projected by CEA stems from the growing necessity for grid balancing with the escalation of renewable energy (RE) penetration. Global experience shows that as RE penetration approaches around 20% of total grid energy, there is a need to establish a dedicated balancing market to ensure stability. India currently stands at 12% and in this aggressive renewable journey that we are embarking on, the threshold is not too far away.

The Ministry of Power has recently amended the Renewable Portfolio Obligation (RPOs) and has included Energy Storage Obligation (ESO). This is another step in demand creation though there is still a need for several tenders by states to be finalised with the government looking at a viability gap funding. India has begun shifting towards developing a breadth of markets enabling BESS participation but there is still potential to encompass the scope of a battery’s value. This will aid BESS systems to provide the services that they are capable of and be adequately compensated for it. For this, regulatory architecture needs to be brought into place to unlock the value streams for BESS in India. For instance, the peak power demand in Delhi is close to 8GW while the off-peak is 5GW. If batteries can reduce the peak demand by 1GW, the power procurement cost will be reduced by 12%, and a part of the savings can be used to provide another revenue stream to batteries.

Yet again, given the fact that utilities are regulated businesses, monetisation of this value stream requires regulatory architecture and thereafter, procurement by utilities of batteries. The next two candidates are EV charging and frequency control; the latter is needed to avoid penalties levied by grid operators when there is a mismatch in demand supply leading to over or under-drawal from the schedule. While the policy and regulatory regime for EV charging has been put in place, monetisation of frequency control still needs to be added. If the three revenue streams are unlocked, each revenue stream contributes ₹2 per unit, and the cost of battery storage comes down to ₹2 per unit, which is very affordable. One does not need to wait for prices to fall before scaling this up. This would complement the manufacturing of BESS given the demand creation, development of new business models and seamless integration of renewables in the grid.

Global Energy Alliance for People and Planet (GEAPP) India is looking at supporting the development of BESS ecosystems by funding four to five pilots with concessional funding that will reduce with successive projects as value streams are unlocked to evolve a market-based regulatory model that enables utilities to procure BESS at scale.

This would fast-track innovative regulations that will unlock the value streams on batteries, provide much-needed balancing support to the grid and lead to much higher levels of RE integration. This would have a positive impact on demand for RE which is needed to achieve the ambitious targets that have been set. These regulations will enable utilities to procure more batteries as they become affordable which will increase demand and therefore investments in manufacturing.

Saurabh Kumar is Vice-President-India, Global Energy Alliance for People and Planet. The views expressed are personal