India is poised for a significant transformation in its energy landscape, with projections indicating that renewable energy generation, including large hydro projects, is set to soar to 40% of the nation’s electricity production by 2030, a substantial increase from the current 25%.
This forecast, unveiled in a report by credit rating agency ICRA, underscores the imperative for developing energy storage systems (ESS) to effectively manage the intermittent nature of wind and solar power, driving this unprecedented growth. ICRA’s report emphasizes the multifaceted role of ESS in not only addressing the intermittency of renewable energy but also enhancing grid stability, providing ancillary support services, and facilitating peak load shifting. In alignment with the Ministry of Power’s guidelines for Battery Energy Storage System (BESS) projects, numerous bids have been initiated by central nodal agencies and state distribution utilities, with fixed tariffs determined based on availability and round-trip efficiency.
A noteworthy observation from the report is the substantial reduction in battery costs witnessed from 2021 to 2023, attributed to moderating raw material prices and increased production across the value chain. This cost decline has propelled a widespread adoption of BESS projects globally. However, Girishkumar Kadam, Senior Vice President & Group Head, Corporate Ratings at ICRA, highlighted that despite the drop in BESS costs to Rs. 6.0-7.0 per unit, they remain higher than those of Pumped Storage Hydro (PSP) projects, which stand at around Rs. 5.0 per unit. Moreover, BESS projects entail replacement capital expenditure, contributing to their overall costs. Nevertheless, Kadam emphasized the shorter gestation period and lower execution risks associated with BESS projects compared to PSP hydro, factors expected to bolster their adoption in the foreseeable future. The report underscores the pivotal role of energy storage solutions in facilitating India’s ambitious renewable energy targets, signaling a monumental shift towards a more sustainable and resilient energy ecosystem.
