Centre seeks inclusion of battery energy storage systems in solar tenders

Currently, 12 GW of battery energy storage systems by Central PSUs and private developers is under construction in India.

The government is pushing central public sector undertakings (CPSUs), states and private developers to build distributed battery energy storage systems for better utilisation of renewable energy and grid stability, two senior officials, one in theMinistry of Power and the other with the Ministry of New and Renewable Energy (MNRE) told Moneycontrol.

For this, the government has urged central and state PSUs to include the component of battery energy storage systems (BESS) in renewable energy project tenders so that both can be developed simultaneously, instead of waiting an additional two to four years for energy storage to come up through separate tendering. Until now, only a handful of such tenders have been floated. In the central pool, NTPC has done it, while among the states, Rajasthan and Maharashtra have asked for such projects from developers.

Distributed energy storage systems offer a solution by storing surplus energy generated during periods of peak production and releasing it during periods of low generation. This way it helps balance the grid and enhance reliability.

Unlike thermal and most other power generation facilities, renewable energy typically does not have a steady output since, for example, solar power generation is impossible at night, and wind power depends on prevailing weather conditions.

“The idea is to co-locate battery energy storage systems at the site of generation. The Centre is asking states, especially RE (renewable energy)-rich states, to engage with RE developers to put more BESS at upcoming solar capacities,” said the senior MNRE official.

Currently, 12 GW of BESS is being installed by CPSUs and private developers. To meet the target of 500 GW of installed non-fossil energy generation capacity by 2030, India would need at least 61 GW of storage capacity, of which 42 GW would be BESS and 19 GW would be pumped storage projects. Government estimates indicate that energy storage would alone require financing worth Rs 14 lakh crore.

“Whatever transmission capacities we have built for renewable energy, most of it is currently utilised only for 6-8 hours a day. Adding distributed energy storage at upcoming RE capacities would help us utilise the transmission corridors for the remaining 16 hours of the day as well,” said the official quoted above.

Speaking at a renewable energy conference on November 14, Pankaj Agarwal, secretary, Ministry of Power, termed distributed battery energy storage systems “the way forward”. He said the plan is quite viable now since the cost of BESS is coming down globally.

“Till now there was a challenge because the cost of BESS was very high (about Rs 10 per kWh). But now the cost of storage has come down to about Rs 4.50 per kWh on a levelled cost basis. Very soon we are going to hit Rs 3.75-Rs 4 per kWh. Hence, I would say BESS has now become quite viable,” Agarwal said.

Girishkumar Kadam, senior vice president and co-group head, corporate ratings, ICRA, said the rise in RE capacity over the next five years is estimated to enhance the share of RE plus large hydro in the all-India electricity generation from 21 percent in FY24 to over 35 percent in FY30.

“ICRA expects the energy storage capacity requirement at 50 GW by 2030, which will be met through a mix of BESS and pumped storage hydro projects. The significant decline seen in the tariffs for BESS projects over the past eight months, driven by the sharp decline in the battery prices, is expected to improve the adoption of the storage projects,” Kadan said.

The cabinet on September 6 last year approved a viability gap funding of Rs 3,760 crore for building BESS with a total capacity of 4,000 megawatt hours (MWh). To ensure that the benefits of the scheme reach consumers, a minimum of 85 percent of the BESS project capacity is being made available to distribution companies for distributed BESS. This will not only enhance the integration of RE into the electricity grid but also minimise wastage while optimising the utilisation of transmission networks. Consequently, this will reduce the need for costly infrastructure upgrades.

ICRA expects the installed RE  capacity (including large hydro) in India to increase to about 250 GW by March 2026 from 201 GW as of September 2024. “The capacity addition will be driven by the large project pipeline of over 80 GW, following the significant improvement in tendering activity in FY2024. Moreover, the tendering activity remained high in the current fiscal, in line with the 50 GW annual bidding trajectory announced by the Government of India in March 2023,” it said in a statement.