India's Energy Storage Sector Primed for Growth, Pumped Storage Leads the Charge
Policy measures and increasing renewable purchase obligation (RPO) targets are providing impetus for the adoption of storage solutions, positioning the sector for substantial growth.
February 22, 2024. By Abha Rustagi
Policy measures and increasing renewable purchase obligation (RPO) targets are providing impetus for the adoption of storage solutions, positioning the sector for substantial growth.
The Ministry of Power's (MoP) notification of RPO targets up to March 2030, coupled with the introduction of energy storage obligations (ESOs), underscores the government's commitment to boosting renewable energy deployment. The ESO targets, set at 1 percent for FY24 with incremental increases, aim to ensure the integration of storage components in renewable energy projects.
CareEdge Ratings' analysis indicates a growing demand for storage capacity, estimated at approximately 12 GW for FY24 and projected to reach around 70 GW by FY30. This surge in demand is driven by the need to accommodate the expanding non-fossil fuel-based capacity and achieve a cumulative capacity installation of 500 GW by 2030.
The report highlights the pivotal role of pumped storage projects (PSP) and battery-enabled storage solutions (BESS) in facilitating the integration of variable renewable energy into the grid. PSP and BESS offer distinct advantages, with PSPs boasting longer project lifespans and cost competitiveness, while BESS provides flexibility and suitability for distributed generation.
Key supportive policies, including the PSP framework released in April 2023 and the viability gap funding (VGF) scheme for BESS launched in September 2023, are driving investments in the energy storage sector. These initiatives aim to streamline project approvals, reduce costs, and standardize terms across tenders, fostering a conducive environment for storage project development.
Sabyasachi Majumdar, Senior Director at CareEdge Ratings, commented, "The government's focus on achieving 500 GW of non-fossil fuel capacity by 2030, coupled with investor interest in the sector, demonstrates a clear commitment to sustainable energy development. While challenges remain, including the financial viability of storage solutions, continued policy support and technological advancements are expected to drive growth in the renewable energy sector."
The report underscores the need for approximately INR 14 lakh crore in incremental debt funding to support the establishment of 450 GW of renewable energy capacity alongside 19 GW of PSP and 42 GW of BESS.
As India's energy landscape evolves towards greater reliance on renewable sources, energy storage solutions will play a crucial role in ensuring grid stability and reliability.
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