Que: How does BESS enhance the integration and reliability of renewable energy sources like solar and wind into the grid?

Ans: With the world gradually moving away from non-renewable sources of energy, the installation and scaling of renewable sources of energy is witnessing significant progress. However, a major impediment to harnessing several sources of renewable energy such as solar and wind is their intermittent nature.

As such, power generation through Variable Renewable Energy (VRE) is only possible during the period of its availability. This is where Battery Energy Storage Systems (BESS) play an integral role. BESS can store the excess energy VRE produced during hours of availability and then subsequently distribute power during periods of unavailability. Thus, the power generated during the daytime or off-peak hours can be stored in BESS and then distributed to consumers when there is peak demand for power. Apart from RE firming, BESS can also provide several other technical services to the grid including ancillary services, thereby also reducing reliance on gas or thermal plants reserved to provide these services.

Que: Please share the current status of BESS deployment in India and the targets for the future, more so on the target of 47 GW by 2032.

Ans: India needs ~47 GW of BESS by 2032 to meet its 600 GW VRE installation ambition as per the last report and statistics released by CEA. As per the RE integration of IEA, energy storage becomes critical in the electricity grid once 10% to 15% of total generated energy is from VRE sources such as solar and wind. India already has ~12% VRE in their energy mix with some high RE states (such as Rajasthan, Gujarat, Karnataka and Delhi) crossing 25%+ VRE in their energy mix with urgent need for several GWs of energy storage. While India is in early stages of BESS adoption across its electricity delivery infrastructure, we have seen a flurry of BESS tenders (over 3 GW) being released in public domain in the past 2-3 years. While bulk of these tenders are for co-located RE+BESS to procure round-the-clock power from renewables, there are also a few large stand-alone BESS tenders at the transmission and distribution end as well. However, most of these tenders are yet to reach financial close and awaiting regulatory nod.

Que: How big is the DERC approval of the country's first stand-alone BESS project, and what precedent does it set for future projects?

Ans: The BESS pilot project in Delhi, in collaboration with IndiGrid and New Delhi DISCOM (BRPL), is the first commercial standalone BESS project in India that received regulatory approval. This approval enables BRPL to pay a monthly capacity tariff for a period of 12 years to the BESS project developer (IndiGrid). The project will enable the Delhi utility to use BESS as grid flexibility asset and enhance the share of low-cost VRE in its energy mix.

Currently DISCOMs and regulators have relatively limited / no benchmark which can be used to underpin the expected value of integrating BESS into the system. This project is the first distributed sited, utility-scale storage system to receive regulatory approval, setting a precedent for other state regulators and DISCOMs to follow suit. This project will also establish an operational philosophy against which multiple BESS value streams can be monetised by a single BESS asset. The project SPV (Kilokari BESS Pvt. Ltd) will be paid by BRPL through a fixed-capacity tariff (in INR/MW/month terms), on availability basis irrespective of the actual consumption or utilisation making the project attractive for commercial investors.

GEAPP has created a robust project development playbook from this project that include activities such as energy modelling, regulatory submissions, techno-commercial business modelling, innovative auction design, etc., that can be replicated by other state regulators and utilities with limited BESS project development experience.

Que: What is the role of government policy in promoting BESS projects, and what more needs to be done to facilitate growth?

Ans: The Government of India (GoI) has taken several policy steps laying the groundwork for an enabling environment for energy storage. These policies have included defining energy storage systems, extending key RE generator benefits to energy storage assets, subsidies, market development, and procurement targets. The National Framework for Promoting Energy Storage Systems released by the Ministry of Power (MOP) in August 2023 details these policies and is a step towards creating a comprehensive national roadmap for accelerating storage development in the coming years. The announcement of a Viability Gap Fund (VGF) of Rs 9400 crore in 2023 is a positive step for the BESS market. The existing national framework is an important step to creating a robust ecosystem for BESS in India. It would be beneficial to give increased attention to technical integration of BESS into the electricity grid as it is still a novel technology for Indian power market stakeholders.

A critical next phase is to operationalize the policy framework through building institutional knowledge capacity, and the adoption and enforcement of regulation for state-level entities, including Discoms, State Electricity Regulatory Commissions (SERCs), and State Load Dispatch Centres (SLDCs). The Forum of Regulator’s Report on Regulatory Frameworks for Energy Storage and Electric Vehicles, issued in November 2022, is a critical start to preparing regulators and Discoms for integrating necessary energy storage technologies into the power system. Further regulatory considerations will help prepare stakeholders to successfully plan, evaluate, integrate, and operate energy storage technologies in the pace and volume necessary to maintain a cost effective and reliable power system. We also foresee new policies and regulations that will enable BESS to participate in the existing and upcoming ancillary markets. Lastly, the development of robust sub-national and national resource adequacy (RA) Framework will be critical for advancing holistic, long-term investments for energy storage in general.

Que: What are the challenges and opportunities in financing BESS projects in India? How does concessional financing help in overcoming the challenges?

Ans: In India, a significant financial viability gap is present between BESS costs and its value that can be derived through current regulatory mechanisms, which has limited the development of market-based solutions for BESS. While upfront hardware costs for BESS in India and international mature markets do not vary significantly, the financing costs are much higher, especially when the off taker is financially constrained electricity utilities / DISCOMs. Moreover, several BESS value streams cannot be monetized and require new regulations and power market design reforms. These factors, amongst others, combine to limit the ability for the first wave of BESS projects to get off the ground in a timely manner. For instance till 2023, India has almost 1.5 GW of stand-alone tenders that have been stuck for the past 3 years due to poorly managed bids, high discovered tariffs, and regulatory bottlenecks and therefore unable to reach financial closure. With concessional and de-risking capital from the public or philanthropic sector, these projects can become highly attractive to the private sector.

A good example of how concessional capital can drive early BESS projects is the Delhi pilot project. With GEAPP providing 70% of upfront capex at concessional lending rates, the discovered levelised annual tariff (or capacity charge) is Rs 57.6 lakh per MW (~USD 69k/MW/year), which is almost 55% lower than the previous benchmark in India of Rs 130 lakh per MW per year. With the reduced tariff/BESS costs, regulators and DISCOMs are more willing to push forward initial BESS projects and gain operational experience, while policy and regulatory reforms and BESS price reductions play catch-up and enable a sustainable BESS market in the future.

Que: Which new technologies or innovations in BESS are you most excited about, and how do you see this impacting the energy sector in India?

Ans: Lithium-ion technologies currently dominate the BESS market with over 90% market share. However, a new set of criteria guiding battery technologies is raw material supply and longer durations storage (6 to 10 hours). We are excited to see some new ‘non-lithium’ technologies gaining traction such as Sodium-ion, Iron air, Redox Flow, and Nickel Hydrogen batteries amongst others, being tested in international markets for their suitability for grid-scale applications and expecting some of these to reach commercial operations in the next 3 to 5 years.

Que: Are there any upcoming collaborations or projects that GEAPP is associated with in furthering the cause of BESS deployment in India?

Ans: GEAPP is committed to expand the BESS market in India to allow for rapid decarbonisation of the national grid. We plan to mobilise technical assistance and concessional capital needed to drive ~1GW of BESS projects by 2026. We are in discussion with several state DISCOMs and will support them in rolling our best-in-class BESS tenders to procure BESS services at competitive prices. We are also developing a ‘Post Commissioning Support Package’ for first mover DISCOMs that will enable them to utilise the BESS capacity optimally and safely, while deriving maximum commercial value from the asset using advanced data tools and software.