Draft mission to kick-start RE storage
The draft National Energy Storage Mission expects to kick-start grid-connected energy storage in India, set up a regulatory framework, & encourage indigenous manufacture of batteries, according to a member of the expert committee set up by the MNRE last month. Draft sets a realistic target of 15-20 GWh of grid-connected storage within the next five years. Power grids do not currently use storage options that would help in smoothly integrating RE sources. Draft has been submitted to the Ministry, & will be released for public feedback in the next few months. The mission will focus on seven verticals: indigenous manufacturing; an assessment of technology & cost trends; a policy & regulatory framework; financing, business models & market creation; R&D; standards & testing; & grid-planning for energy storage.
RE sources now make up almost one-fifth of India’s total installed power capacity. However, as power grids increase their share of solar & wind energy, the problem remains that the peak supply of renewable sources does not always meet peak demand. For e.g., solar energy generation may be at its peak at noon, but unless stored, it will not be available when needed to light up homes at night. Moreover, renewable sources are inherently intermittent: there are days when the wind doesn’t blow or the sky is cloudy. Batteries could help store surplus energy during peak generation times, but are more immediately needed to stabilize the grid when shifting between renewables & the baseload thermal capacity. Once the installed capacity of renewables reaches 100 GW from the current 65 GW, it will become critical to incorporate storage options. SECI expects to issue tenders for grid-connected storage by the end of the year. For its own 160 MW plant in AP, the SECI will issue tenders for a storage option by the end of July. Up to 10% of solar power can be injected into the grid without storage. After that, storage will become a necessity.
Industry players complain that the SECI as well as the NTPC & the NLC cancelled at least nine earlier tenders for grid storage in 2017. This sends a negative signal both to global manufacturers & Indian CoS who are looking to diversify into lithium ion battery manufacturing. CEA is considering regulation to make storage mandatory for large scale solar projects ranging between 100 MW & 200 MW. Also there are price concerns for the cancellation of bids. Adding storage options could result in solar power spiking ? 3-4/ unit above its current low price of ? 2.44/ unit, making it unattractive to distributors. It is imp. to look beyond mere capex costs, & also consider life cycle costs, & the distributor’s costs due to grid instability & T&D losses. Currently, the lithium ion cells needed for battery storage are not manufactured in India, although major players, including IOCL & Exide, are working to develop indigenous manufacturing capacity.
Future of RE in India
With 300 clear sunny days, over a dozen perennial rivers & a coastline of more than 7,500 KMs, India since the age of Puranas, had realized the importance of the sun & other sources of RE & the power they possess for the benefit of its inhabitants. Post-Independence, India's first Prime Minister, Shri Jawaharlal Nehru while inaugurating the Bhakra Nangal Dam (having a potential to generate 1500 MW of Power) described it as the 'New Temple of Resurgent India'. However, except hydro power, the other two abundant energy resources - wind & solar remained untapped in the last 70 years mainly due to lack of political will & unviability of relevant technologies. This fact is not hidden from anyone that India is the world's fourth-largest carbon emitter with its population of 1.3 bn people with power sector contributing majorly to the same. But in the recent years, India has made sig. strides in the RE space. The Climate Change concern across the Globe has further propelled govt. & Decision Makers to develop a detailed blue print for clean & sustainable power for all. As part of the initial commitments to the Paris Climate Accord, India plans to reduce its carbon emission intensity - emission/ unit of GDP - by 33-35% from 2005 levels over 15 years. It is working towards producing 40% of its installed electricity capacity by 2030 from non-fossil fuels. This would lead to a sig. shift from coal-based power generation to RE sources. To achieve these challenging statistics, it has to produce 100 GW from solar, 60 gigawatt (wind), 10 GW (biomass) & 5 GW (small hydropower) by 2022.
And this seems quite an uphill task as the RE development in India is still in its nascent stage. As per the Ministry of Power, Govt. of India, India's energy mix is evolving slowly with fossil fuels meeting 82% of demand; Coal remaining the dominant fuel with a 57.9% share of total production in 2018. However, there is also a silver lining behind the dark cloud, with the share of coal in the energy mix projected to fall to 50% by 2040, while the share of renewables rises sig.ly. Renewables will overtake gas & then oil by 2020 as the second largest source of energy production. As per the IEA Renewables Report, Solar & Wind represent 90% of the country's capacity growth, which is the result of auctions for contracts to develop power-generation capacity that have yielded some of the world's lowest prices for both technologies. India, which presently has low conventional energy resources in comparison to the energy needs of the huge population & the swiftly growing economy, can foster enormous potential of solar energy. India is committed towards the development of RE infra. 175 GW target for 2022 & the formation of ISA led by India & France is another e.g. of the same. Apart from solar, the country is also exploring hydro power potential in the north-eastern states which are an abode to the hydro power opportunities.
Besides the above, change in the energy mix will also ride upon innovative technologies, growing energy demand, strong wind & solar resources, policy support, & growing investments et al & will ensure smart, reliable, clean & affordable energy to over a bn people with an energy consumption growth of 4.2% p.a., faster than all major economies in the world, overtaking China as the largest growth market for RE by the late 2020s. Another research by University of Technology (LUT) in Finland expounds that India has a huge potential to move into a fully renewable electricity system by 2050, owing to an abundance of renewable resources. If only we can optimally leverage sophisticated technologies to harness proactive collaboration with the industry, academia & energy innovation ecosystem, the region can move straight to affordable renewable systems. Such RE systems can work mainly on clean energy, solar energy, wind energy & other new age storage solutions. Solar PV is the most economical electricity source & batteries satisfy the night-time electricity demand. In addition to covering India's electricity demand for power, such system simulation can also cover for seawater desalination & synthetic natural gas beyond other measures. With the right investments in such green technologies, India is well positioned to achieve all this. This is sig. given India's burgeoning electricity demand & the persistent supply demand gap along with the summer shortages & outages, the pursuit towards cleaner energy sources will have a crucial role in enabling the country's transition to a fully sustainable energy system. Ensuring those projects secure the necessary financing to enable that development, however, remains a challenge, with a large proportion of Southeast Asian projects considered un-bankable. The bankability of RE projects has always been an issue owing to off takers' inability to absorb power & pay for it.
Amongst the various developments that have taken place in the solar & wind power segments this year, the ones that would have a long-term impact on the power sector include bidding in the wind segment, which would mean that utilities would not scout for wind sites & choose wind turbine suppliers through competitive measures. Another vital strand is govt. would tender 20,000 MW of solar capacity, which would perhaps be the largest block of capacity to be auctioned in a single tranche for the first time globally. Govt.'s strong resolve to heightened quality standards for imported solar PV modules, enforced through inspections will further help procurers get over 25 years of module life. This reflects a national commitment to green energy & shows how the country is fast transitioning towards a renewable focused economy expediting renewable capacity build-up & removing the difficulties being encountered by developers & manufacturers. Future looks bright as nearly 293 global & domestic CoS have committed to generate 266 GW of solar, wind, mini hydel & biomass-based power in India over the next decade. The initiative would entail an investment of $310 bn-$350 bn. For instance, the International Finance Corporation, the investment arm of the World Bank Group, is planning to invest about $6 bn by 2022 in several sustainable & RE programs in India. Indian power sector has an investment potential of Rs 15 tn over the next 4-5 years, which indicates immense opportunities in power generation, distribution, transmission & equipment. While there is plenty of capital chasing the opportunities in the renewable sector, there are several risks that need to be kept in view, including counterparty risks both in terms of developers & procurers.
Good news is RE storage system market in India is expected to witness robust growth, over the next decade, once the cost of storage declines, which is likely to happen because of the sheer volume growth through the electric vehicle route. However, the success will only be possible when the FAME 2 will meet its desired objectives. To draw a parallel with other countries, in Dec TESLA's 100MW Hornsdale Power Reserve battery system in South Australia delivered 100 MW into the national electricity grid in 140 milliseconds, instantly powering 1,70,000 homes when the Loy Yang coal power plant suddenly went offline. This testifies, why energy storage has become a complementary solution for RE, which is seasonal & intermittent for ensuring 24×7, robust supply of energy. The thrust on solar & wind projects has increased the challenges in maintaining system stability, which is encouraging developers to support power grid networks with battery storage to help manage the variations in power supply. RE projects backed with battery technology could transform the energy scenario in India. However, the challenge is to develop a technology that is suitable for large RE projects. As per industry reports, the deployment of energy storage is anticipated to grow over 40% annually in the next 10 years, with around 80 GW of additional storage capacity.
As India's leading RE players with a gross generation capacity of 3,210 MW through clean non-fossil sources, we are committed to transform the sector in sync with govt.'s vision of promoting RE building a total capacity of 20,000 MW by 2025, of which 30-40% would be based on non-fossil fuel. The need of the hour is addressing the bankability of RE projects which has always been an issue in India, owing to off-takers' inability to absorb power & pay for it. The power purchase agreement structure needs to be strengthened further to make RE projects more bankable. There are states which, owing to their fiscal challenges, are not encouraging the must-run status of renewables & are forcing such capacities to back down when wind velocities are unfavorable. Govt., hence, should enforce must-run status as an obligation for all consumers to buy a good proportion of clean & green power. We also need to address some challenges faced by power producers which include high fuel supply risk, time overruns at plants, & the limited paying capacity of the financially weak distribution utilities due to pre-defined RPOs in their PPAs.
Last but not the least, in order to remain energy positive & to make the most of RE sources, we will have to parallelly focus on aggressive promotion of energy efficiency practices as India's Energy demand will witness an exponential spurge owning to the lighting & cooling requirements due to the varied climatic conditions, the developments in the Electric Mobility, growth of the Industries as well as rural electrification. World Bank in its report titled 'Utility scale DSM opportunities & business models in India' has pegged India's energy efficiency market at Rs 1.6 lakh /- Cr. by considering the end use energy efficiency opportunities which is four times the Rs 44,000/- Cr. in 2010, against the backdrop of the success of govt. of India's UJALA scheme to distribute LED bulbs (Bachhat Lamp Yojana). Till now, over 28 Cr. LEDs have been sold across the country which has resulted in energy savings to the tune of 36,545 MUs & avoided peak demand of 7317 MW. In monetary terms, savings of around Rs. 14,618/- Cr.s have been achieved. This will also provide a very good market for CoS manufacturing energy efficient lighting & appliances as well as CoS providing DSM solutions. In such a scenario, a bright & sustainable future beckons us.