India could become the world’s third largest market for utility-scale batteries, with capacity additions expected to rise to 9 GW by 2030, fuelled by the cost competitiveness of solar photovoltaics (PV) coupled with battery storage, according to a recent report from the International Energy Agency (IEA).

The rapidly declining cost of utility-scale batteries is a driving force behind the solar-plus-storage surge. The IEA’s report highlights that global average costs for four-hour duration battery systems are expected to fall by 40% over the next eight years, from $290 per kilowatt-hour (kWh) in 2022 to $175/kWh by 2030. In India, cost reductions are projected to be even steeper.

Prices of utility-scale lithium-ion batteries have already declined by 90%, from $1,400 per kilowatt-hour (kWh) in 2010 to less than $140 per kWh in 2023, one of the fastest cost declines of any energy technology ever.

According to the Announced Pledges Scenario (APS), which assumes that all targets announced by governments are met on time and in full, IEA predicts that solar PV and battery systems will form the backbone of India’s power grid by 2050, with batteries charging during peak solar hours and discharging during evening peak demand periods.

While the total daily power generation will be dominated by solar, according to the scenario, battery storage will provide grid support during peak hours.

Solar-plus-Battery Cheaper than Coal

By 2030, the IEA projects that the value-adjusted levelized cost of electricity (LCOE) for solar-plus-battery systems in India will be lower than that of new coal-fired power plants, driven by tumbling costs of batteries.

The report said that innovative tariff structures and financial incentives are also stimulating consumer demand for battery systems. Production-linked incentives worth nearly $2.5 billion to spur domestic battery manufacturing in India will also help bring prices down.

The rise of solar-plus-battery systems could also alleviate India’s reliance on imported coal. But if battery storage deployment falters, the IEA warns that India might need to increase both domestic coal production and imports, adding an estimated $5 billion annually to its coal import bills from 2030 to 2050.

Meanwhile, according to a recently released Mercom report, the global energy storage sector witnessed a 432% increase year-over-year in corporate funding, totaling $11.7 billion across 29 transactions, from $2.2 billion in 27 deals.