India Allocates Over 8 GW in Energy Storage Tenders: IEEFA Report
An in-depth analysis of India's burgeoning ESS sector reveals its poised growth in the coming years, aligning with the exponential rise of the renewable energy sector globally.
December 21, 2023. By Abha Rustagi
An in-depth analysis of India's burgeoning ESS sector reveals its poised growth in the coming years, aligning with the exponential rise of the renewable energy sector globally.
Vibhuti Garg, Director of South Asia at IEEFA and contributing author of the report, emphasizes the crucial role of ESS in overcoming the intermittency of renewable energy, ensuring a continuous and reliable energy supply.
“The exponential surge in renewable energy installations within the past decade has exposed the grid infrastructure to increased risks arising from renewables’ intermittent and variable nature, especially solar and wind. ESS is crucial in overcoming this intermittency and enabling a continuous energy supply when needed. Thus, for sustainable renewable energy addition, a concurrent growth of ESS capacity is also imperative,” she said.
Battery-based ESS (BESS) and pumped hydro storage (PHS) stand out as the most widespread and commercially viable means for implementing energy storage solutions in India. The report anticipates that green hydrogen will play an increasingly significant role in the country's renewable energy mix in the coming years.
The Central Electricity Authority estimates a substantial need for about 42GW of BESS and 19GW of PHS capacity by 2030 to meet India's evolving energy landscape. Large, grid-scale ESS projects are identified as critical in fulfilling these future energy needs, with the latest demand-driven Firm and Dispatchable Renewable Energy (FDRE) tenders presenting an ideal model for India.
Jyoti Gulia, Founder of JMK Research and co-author of the report, highlights the significance of FDRE and said, “FDRE tenders, first issued in 2023, are demand profile-driven tenders to ensure firmness and dispatch ability of renewable energy, and create a win-win scenario for power developers and off-takers.”
FDRE represents the latest and most advanced iteration of tender models, with tariffs already comparable to, if not lower than, traditional fossil fuel-based power generation. With longer tenures of up to 25 years, the tariffs of mature grid-scale FDRE storage projects are expected to become even more attractive.
Prabhakar Sharma, Consultant at JMK Research and co-author of the report points out that falling ESS costs, especially for BESS, and sustained cash flow over a longer duration enable ESS developers to offer lower tariffs. Policy measures, including energy storage obligation (ESO) targets, are creating a conducive environment for ESS projects.
However, obstacles to the expansion of ESS persist, such as high initial capital expenditure, longer gestation periods (especially for PHS projects), suboptimal infrastructure, and a lack of domestic manufacturing, highlighting potential supply chain risks.
Gulia concludes that India's ambitious plan to increase its Variable Renewable Energy (VRE) installed capacity from 117GW to more than 392GW by 2030 necessitates a simultaneous growth in ESS capacity to support this surge in VRE penetration.
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