Levelized Cost of Storage for Standalone BESS Could Reach ₹4.12_kWh by 2030_ Report

The Government of India (GoI) has set a target of achieving 175 GW of renewable power installed capacity by December 2022. However, the capacity value of these variable renewable energy resources is limited without grid-scale energy storage.

According to a report published by the Lawrence Berkeley National Laboratory (LBNL), a large number of energy storage projects are being built worldwide, and there is a significant interest among policymakers in India as well.

The report states that the sharp decline in the prices of lithium-ion (Li-ion) batteries is going to transform how electricity from renewable sources is integrated into the grid.

The report says that India is on the cusp of making important investment decisions over the next two decades. According to the 19th Electric Power Survey, the Central Electricity Authority (CEA) estimates that the peak electricity demand in India will grow at the rate of 6.32% per year and will touch 300 GW by 2026-27 as compared to 162 GW in 2016-17.


According to India’s National Electricity Plan, 123 GW of additional capacity will be required to meet the peak demand, because the contributions of renewable sources in meeting the peak demand are assumed to be minimal. The main reason behind this is that India’s peak demand occurs during the evening, and even though wind energy is available during the evening, it is highly seasonal.

According to CEA, meeting India’s 340 GW peak load and 2,400 TWh energy requirements would require the addition of nearly 50 GW of coal between 2022 and 2027, in addition to 48 GW to be added by 2022.

The report notes that the last 130 GW of coal that provides power during non-solar hours, including morning and evening peak, would run at an effective plant load factor (PLF) of only 24%. Running coal projects at such a low capacity factor would be operationally difficult and would result in total costs per unit of ₹6–8 (~$0.08-0.1)/kWh.

The report further adds that keeping this in mind, an alternative battery energy storage system (BESS) based on low-cost lithium-ion batteries may enable India to meet the morning and evening peak demands. The Ministry of New and Renewable Energy has been tasked with the implementation of the National Energy Storage Mission.

In August last year, SECI had floated a tender of for 1,200 MW solar-wind hybrid power with guaranteed supply during peak hours. Greenko won the auction for 900 MW, and ReNew was awarded 300 MW. Greenko won the bid at a peak power tariff rate of ₹6.12 (~$0.08)/kWh and ReNew Power won at ₹6.85 (~$0.09)/kWh. Many expect this tender to kickstart the commercial deployment of grid-scale storage in India.

According to NITI Aayog and Rocky Mountain Institute estimates, India will account for 800 GW of battery demand per year by 2030. In another report, the Energy Transitions Commission (ETC) projects that the levelized cost of storage systems in India will reduce from $0.41 (~₹30.8)/kWh in 2018 to $0.17 (~₹12.8)/kWh in 2030.

The report adopts a two-pronged approach to estimate the cost of Li-ion based MW scale battery storage systems in India. The report takes the case of solar projects in Nevada, which are coming online in 2021, with 12-13% solar energy used to charge the battery, and PPA prices in the range of $0.032-$0.037/kWh. These rates are nearly 9-27% higher than the current tariffs in India, which is around ₹2.75/kWh.

The report further notes that capital costs for batteries co-located with storage projects in India would fall to $187 (~₹14,074))/kWh in 2020 and $92 (~₹6,924))/kWh in 2030. The levelized cost of storage (LCOS) of standalone BESS is estimated to be ₹7.12/kWh (~$0.095/kWh) by 2020, ₹5.06/kWh (~$0.07/kWh) by 2025, and ₹4.12/kWh (~$0.06/kWh) by 2030.

Levelized Cost of Storage Estimates for 1 MW BESS in India

The report further states that the additional per-unit cost for a solar project with a storage system in India will be ₹1.44/kWh ($0.02/kWh) in 2020, ₹1.02 ($0.014)/kWh in 2025, and ₹0.83 ($0.01)/kWh in 2030. This implies that bids for solar with battery storage will hover around ₹3.94 ($0.052)/kWh by 2020, ₹3.32 ($0.044)/kWh by 2025, and ₹2.83 ($0.038)/kWh by 2030.

The report says that these costs are inflation-proof, while coal prices will keep on increasing each year. In the future, the cost difference between solar-plus-storage assets and thermal assets is likely to increase. Hence, new investments in thermal power projects with lifetimes of 25–30 years may present an extreme financial risk.

But for all these projections to hold good, a concerted effort is required on the part of the government to scale up the deployment of solar with battery storage capabilities. A clear-cut policy roadmap is the need of the hour that will give the necessary boost to the battery manufacturing segment and will add new jobs.

According to Mercom, the global battery storage sector attracted corporate funding (including VC, debt, and public market financing) worth $244 million in nine deals in Q1 2020 compared to $130 million raised from nine deals in Q1 2019, an 88% increase.

The government also issued a proposal to set up a national mission on transformative mobility and battery storage initiatives last year. The Cabinet has also approved the creation of the Phased Manufacturing Program (PMP) to support the development of large-scale, export-competitive integrated batteries and cell-manufacturing giga-scale projects in India. The Phased Manufacturing Program will be valid for five years until 2024 and help in localization of production across the entire electric vehicle value chain. The program is expected to be finalized by the national mission on transformative mobility and battery storage.

 

Image Credit: Sungrow