India to Add 6 GW RE Storage By 2028

India will boost its renewable energy storage by 6 GW by 2028, driven by a strong project pipeline and government support. Challenges include high costs and slow project implementation, says CRISIL Ratings report.

August 14, 2024. By EI News Network

India's renewable energy storage capacity is set to add 6 GW by fiscal year 2028, a substantial increase from less than 1 GW in March 2024. This expansion is driven by a strong pipeline of projects and an accelerated pace of auctions, crucial for accommodating the increasing share of renewable energy in the country's power generation mix, as per the latest report by CRISIL Ratings, a global analytical firm.

Although project implementation has faced delays, the government's commitment to advancing renewable energy and competitive tariffs for round-the-clock RE established in the last two fiscal years are boosting sector confidence, said CRISIL in its statement.

RE sources, such as solar and wind, are intermittent and do not always align with peak demand periods. For example, solar power is primarily generated during the day, while peak demand often occurs in the morning and evening. To address this, excess energy needs to be stored and released as required to ensure grid stability.

Furher it said that to tackle these challenges, the government is investing in both standalone storage systems (like pumped hydro and battery storage) and storage-integrated projects that combine renewable energy generation with storage.

Recent auctions have seen approximately 3 GW of standalone storage and about 10 GW of storage-integrated projects (including around 2 GW of storage) auctioned in the past two fiscal years, a notable increase from less than 1 GW previously. As of May 2024, this has created a robust pipeline of around 6 GW of storage capacity.

According to government estimates, developing this storage capacity is essential to sustainably increase the share of RE to 20-22 percent of the total power generation mix.

Manish Gupta, Senior Director at CRISIL Ratings, comments, “However, progress on implementation has been tardy. Slow adoption by state distribution companies (discoms) has been a key deterrent to implementation 60- 65 percent of such projects had not got their power purchase agreements (PPAs) executed until May 2024.”

The higher tariffs for storage projects (INR 4.3-5.5 per unit) compared to other renewable energy bids (INR 2.6-3.2 per unit) have contributed to this slow uptake. However, the government's continued push for renewable energy and efforts to align storage project tariffs with other round-the-clock power sources are expected to drive greater adoption, as per the CRISIL report.

The government's target is to expand renewable energy capacity to 450 GW by 2030, up from 130 GW as of March 2024. To achieve this, Renewable Purchase Obligations (RPOs) have been set, requiring discoms to increase their renewable energy share from around 25 percent to 39 percent by fiscal year 2028. This will necessitate greater procurement of renewable energy and a stronger focus on storage solutions essential for grid balancing.

Says Ankit Hakhu, Director, CRISIL Ratings, “Though tariffs of projects with storage (INR 4.3-5.5 per unit) are above the typical renewable bids (Rs 2.6-3.2 per unit), they are comparable with that of other round-the-clock sources, including tariffs discovered through medium-term power purchase agreements of coal thermal plants (~INR 5 per unit in fiscal 2024). This further provides confidence on increase in traction of signing of PPAs."

However, it said that the 6 GW storage projection is dependent on cost estimates and timely project execution. Unexpected cost increases or shortages of critical materials, such as solar modules and batteries, could impact project viability, given that tariffs are fixed and do not accommodate cost pass-through.

Additionally, technological risks, such as water evaporation rates for pumped hydro and battery degradation rates, may affect project implementation and operations due to the limited experience with large-scale projects in India.

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