Solar with storage is an economically viable solution for most C&I consumers across India
As per the Central Electricity Authority (CEA) estimates, the share of renewable energy generation in total energy mix, would increase from 18% in 2019 to 44% by 2030, while the share of thermal is likely to reduce from 78% in 2019 to 52% by 2030. With this, grid penetration of RE sources also is likely to reach 44% in next 10 years. As per the Western Wind and Solar Integration Study (WWSIS) by National Renewable Energy Laboratory (NREL), with 30% RE penetration, á grid becomes unstable and in turn, affects the performance of other power generating plants such as those of coal and nuclear.
Effective energy storage solutions hold the key to overcome these challenges. Storage technologies can provide the required backup power for intermittent renewable energy capacity without threatening grid stability or the ability to meet electricity demand. Despite many notable advantages, the adoption rate of storage systems has been very low in India. This can be attributed to various factors ranging from high upfront costs, lack of consumer awareness, lack of favourable state policies, O&M challenges.
To bring momentum in this sector, the Government of India undertook several initiatives:
- In the budget 2019, the Government reduced custom duties on Cobalt mattes from 5% to 2.5%, a key ingredient for advanced lithium-ion batteries.
- In March 2019, the cabinet approved the National Mission of Transformative Mobility and Battery Storage, under which phased manufacturing programs, valid till 2024, are approved to support e-mobility and battery storage.
- The Government introduced a Wind-Solar hybrid policy in May 2018, permitting the use of any kind of energy storage technology to maintain grid stability by keeping demand and supply gap as low as possible.
- On 08 April 2019, MNRE issued draft guidelines of storage battery testing in test labs under the Implementation of Quality Control Order on SPV Systems, Devices, and Components Goods 2017. These guidelines are yet to be finalized.
- In January 2017, CERC introduced a staff paper on Energy Storage in India. The paper talks about the grid level applications of energy storage systems, potential owners of energy storage facilities, operational framework, and challenges. However, the paper does not specify any target or incentives for setting up energy storage plants.
- In January 2020, MNRE has released a draft policy for the supply of Round-The-Clock (RTC) power to DISCOMS which would be a mix of renewable energy and electricity generated in coal-based plants. According to the draft, a generator has to supply power such that at least 51% of the annual energy supplied corresponds to RE and the balance is drawn from thermal sources.
To understand the current cost dynamics of battery storage, JMK Research & Analytics did a detailed analysis of technical and financial parameters of the Solar+storage system for three different scenarios for behind the meter installations for Commercial and Industrial (C&I) segment. Findings of the same are as following:
- Grid-connected 25 MW solar with 10 MW/4-hour battery backup: Basis various technical and financial assumptions, by 2021, the tariff of solar+storage system in this scenario comes to about INR 7/ kWh. For 3 hours backup, with this system, grid parity is already achieved in the top 10 states for commercial consumers. For industrial consumers, the tariffs of solar+storage are still not viable. However, the price reduction in the coming years, coupled with an increase in tariff for the industrial consumers, would drastically improve the viability of the Solar + storage system.
- Decentralized/ Offgrid 10 MW solar with 2 MW/10-hour battery backup: For this case, as per JMK Research findings, by 2021, the tariff for the solar+storage system including wheeling and transmission charges and losses comes to about INR 8.5-9/ kWh. For commercial consumers, this tariff is much lesser than the current tariffs paid by them in Lakshadweep and Andaman & Nicobar Islands. For industrial (HT) consumers, the solar+storage tariff is feasible in Lakshadweep islands but not in Andaman & Nicobar Islands.
- 1 MW rooftop solar system with 250 kW/4-hour battery backup: The Levelized Cost of Energy (LCOE) for a 1 MW rooftop solar system attached to a 250 kW of energy storage with a backup of 4 hours is around INR 6.6–6.8/ kWh. This is lesser than the grid tariff of most of the commercial and industrial consumers and far less than the cost of power produced from Diesel gensets.
The conclusion derived from the above case studies is that the LCOE of solar+storage system is already economical for the commercial and industrial category in the majority of the states for both open access (group-captive model) and rooftop solar projects. Solar+storage is also a viable option for the standalone system where there is no Grid connectivity, and the electricity is generated using diesel gensets. The cost of storage systems is likely to fall further with the proposed battery manufacturing facilities. Thus, improving the financial viability of solar+storage system.
Furthermore, to increase storage adoption, the policymakers should devise policies to benefit all the stakeholders and promote storage systems along with solar. Financial incentives can help in reducing the burden on consumers/ utilities and will help in faster adoption. A separate fund can also be created to support solar+ storage systems. The government can also direct FIs and banks to provide low-cost financing to the upcoming solar+storage projects, which would further help in tariff reductions and improve projects’ viability.
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