The Department of Heavy Industry (DHI), Government of India, has issued a notification for the performance-linked incentive (PLI) program ‘National program on Advanced Chemical Cell (ACC) battery storage’ to implement ACC manufacturing facilities for electric vehicles (EV).
The program’s total incentive payout for five years is ₹181 billion (~$2.47 billion).
In November 2020, the central government had approved the PLI program in ten critical sectors to enhance India’s manufacturing capabilities and exports under the Atmanirbhar Bharat initiative.
The government said it would allocate ₹1.45 trillion (~$19.61 billion) for the ten critical sectors over the next five years, including high-efficiency solar photovoltaic modules, advanced chemistry cells battery, and automobiles and auto components. The government has plans to allocate ₹796.42 billion (~$10.75 billion) for these three sectors in the next five years.
Meanwhile, the NITI Aayog had issued a draft request for proposal (RfP) to prospective bidders who can manufacture ACCs in the country.
Advanced chemistry cells can store energy either as electrochemical or as chemical energy and convert it back to electric energy as and when required. Globally, manufacturers are investing in these new-generation technologies at a commercial scale to fill the expected boom in battery demand through 2030.
According to the latest notification, integrated battery value can be broadly divided into the battery pack and the ACCs. While several companies in India have already started investing in battery pack assembly, these facilities’ capacities are too small compared to global averages.
Investments in manufacturing and overall value addition for ACCs are still negligible in India. Hence almost the entire domestic demand of ACCs is still being met through imports.
The government has plans to optimally incentivize potential investors, both domestic and overseas, to set up giga-scale ACC manufacturing facilities with an emphasis on maximum value addition, quality output, and achieving pre-committed capacity level within a pre-defined period.
The eligibility criteria will be specified in the RfP. The amount of subsidy to be disbursed would be calculated by multiplying these three parameters
- Applicable subsidy amount/ kWh
- Percentage of value addition achieved during the period
- The actual sale of ACCs (in KWh), as specified in the RfP
The actual subsidy disbursement to the beneficiary firm has been capped at 20% of the ACC sale price (net of GST). The effective total turnover (net of GST) on account of the sale of ACCs manufactured and sold by the beneficiary firm, during the subsidy disbursement period, as per the provisions specified in the RfP.
The program aims to set up a cumulative ACC manufacturing capacity of 50 GWh for ACCs and an additional cumulative capacity of 5 GWh for niche ACC technologies.
Incentives will be offered to firms that have been allocated an ACC production capacity (cumulative capacity for all beneficiary firms combined is 50 GWh) by inviting the RfP. The beneficiary company must commit to set up a minimum of 5 GWh of ACCs manufacturing facility. The total annual cash subsidy would be capped at 20 GWh per beneficiary firm.
In addition to 50 GWh of cumulative ACC capacity, 5 GWh of cumulative capacity would be offered to niche ACC technologies of higher performance with a minimum threshold capacity of 500 MWh. The initiative would also be technologically unbiased towards the use of different technology tools. Only the higher performance parameters would be the prerequisite for being eligible.
The manufacturing facility should be commissioned within two years, and the subsidy would be disbursed over five years.
The beneficiary firm must achieve a domestic value addition of at least 25% and incur the mandatory investment of ₹2.25 billion (~$30.77 million)/GWh within two years (at the parent unit level). The firm is expected to raise domestic value addition to 60% within five years, either at the parent unit, in case of an integrated unit, or at the project level, in case of ‘hub & spoke’ structure, as will be specified in the RfP.
To ensure a single-window mechanism for the potential investors, a state-level grand challenge will be initiated, including provision for encumbrance-free land, trunk infrastructure facilities, power at a rationale rate to the potential investors for attracting the ACC projects their states.
Guidelines for the PLI program for high-efficiency solar photovoltaic modules were issued in April. The Indian Renewable Energy Development Agency, the implementing agency, has also invited bids for setting up manufacturing capacities for vertically integrated high-efficiency solar modules under the program.
Rahul is a staff reporter at Mercom India. Before entering the world of renewables, Rahul was head of the Gujarat bureau for The Quint. He has also worked for DNA Ahmedabad and Ahmedabad Mirror. Hailing from a banking and finance background, Rahul has also worked for JP Morgan Chase and State Bank of India. More articles from Rahul Nair.