With India announcing its intention to achieve net-zero carbon emission by 2070 at COP26, more than 90% of the global economy will now be covered by a net-zero target. This means that economies around the world will soon shift drastically from a paradigm of oil and gas domination to renewable energy. Climate relevant technologies are and will continue be at the heart of this transition. With increasing renewable energy (especially solar and wind) deployment across the world, the need for battery storage systems is becoming critically important given the intermittent nature of renewables. With larger deployments and concomitantly lowered costs, battery storage technologies are becoming more technically and financially feasible. However, for this transition to continue, supply of storage systems needs to keep pace with the demand. Critical raw materials such as lithium and cobalt which form the basis of lithium-ion batteries, will be at the center of the new global clean energy order and would largely dictate the supply momentum.
As a component of net-zero pledge, India has increased the target of non-fossil-based generation even higher, from previous 450 GW to 500 GW, and making renewables 50% of the total energy mix by 2030. To support the integration of high-capacity renewables, battery storage will be a critical component. According to IEA, India will have battery energy storage capacity of up to 200 GW by 2040.
India is in the process of formulating policy frameworks and roadmaps for scaling up battery storage through comprehensive policy framework to promote energy storage in power sector. Battery manufacturing in India is also picking up the pace but the country still imports majority of its demand of lithium batteries, in 2019-20 it imported 450 million units of lithium-ion batteries valued at INR 6,600 crore (US$ 929.26 million). Indigenously manufacturing batteries will be a critical if India wants to become self-reliant and wants to reduce billions of dollars on imports. India has also announced a production linked incentive (PLI) scheme for manufacturing of advanced batteries with a provision of 50 GWh. However, it is also understandable that India’s resources are constrained as it doesn’t have any reserves of battery raw materials nor does it have the refining capacity to produce battery grade materials. India will continue to be dependent on foreign nations. Further, India does not spend a significant amount of its GDP on research and development of new generation batteries as compared to its counterparts. While the EU, Japan, China and the US spend the most on energy R&D, in India, public spending was just 0.02% of GDP between 2012-19. Thus, until India adopts a holistic long-term strategy to secure critical materials and strengthen its domestic manufacturing value chain, deployment of battery storage systems in the country will remain prohibitive.
While battery storage is still a nascent industry in India, it would be perhaps beneficial to draw both technical and policy lessons from the projects in developed countries. India may simultaneously design its strategy while developers, utilities and asset owners implement pilot projects. The US is the world’s largest battery storage market and has installed 712 MW in 2019. These projects have often faced many challenges and failures and present us with valuable lessons both for the government as well as developers.
First, battery storage is highly dependent on the national policy environments and absence of regulations for its deployment can remain a roadblock in the growth of battery storage. US state California has adopted aggressive policies and has set the target of carbon-free electrical grid by 2045, which has resulted in creation of several storage projects. Lack of market rules and regulations creates uncertainty leading to burden on the projects. Second, rules governing ownership have long been a point of contention in electricity markets. Energy storage has a range of owners such as power plants, generation companies, distribution and transmission companies. The presence of such a wide range of owners adds to the complexity of defining the role of each of them in order to decide how different costs (market entry fee, license fee, cost of grid integration) will be distributed, and how revenue will be shared. Many US states continue to review their storage ownership rules. Third, controls and monitoring are essential to ensure safety. For large-scale grid energy storage, the battery system architecture is quite different. Large scale storage grids typically have long battery strings which contain thousands of cells making it difficult for the controls and data acquisition. In the absence of proper monitoring, the string of cells can result in poor performance which can lead to premature degradation, adding additional cost to the project. Grid energy storage project is also not safe from the fire incidents as lithium batteries can catch fire. Tesla, a leading company in battery storage, has experienced cases of fire breakouts at its storage site in Australia. Monitoring systems can identify and warn of potential safety issues in order to prevent any danger to life or property. Fourth, utility scale battery storage is almost entirely dependent on the growth of lithium-ion battery technologies. As lithium-ion technology is relatively new, there is a need for continued R&D and innovation. Tesla thrives on innovation to produce batteries with high energy density, based on least cobalt-based lithium batteries. Further, Tesla has introduced a specific utility scale battery storage system called ‘megapack’ that significantly reduces the complexity of large-scale battery storage, providing an easy installation and connection process. Megapacks deliver significant cost and time savings compared to other battery systems and traditional fossil fuel power plants.
The lack of a proper regulatory framework in India prevents development of battery storage. To remedy this, the regulatory bodies need to establish regulatory measures that clarify the commercial contract framework, long-term roadmap, inclusion of battery storage in power and network planning, etc. Finance is yet another barrier as investments in R&D and innovation are critically low. This highlights the need for higher spending on innovation and R&D.
“Views expressed are the author’s own and don’t necessarily reflect those of ICRIER.“