The government is working on voluntary gap funding (VGF) for battery storage projects, as well as floating a production linked incentive (PLI) scheme for grid-scale storage, said Power Minister RK Singh.

In an interview to BusinessLine, Singh said the government is also exploring two grid-scale technologies for Energy Storage System (ESS).

Excerpts from the interview:


How important is energy transition? What are the issues faced?

Energy transition is important for us as demand is rising very rapidly and if we do not go towards RE technologies then the pressure on the availability of coal will increase, which is a problem with respect to India’s rising power consumption. We have to import coal for blending. As demand rises, the coal production rising in tandem is a challenge.

Another issue is that the process of Environment Clearance (EC) has been made very convoluted by the previous government. Now to set up a coal mine, EC takes over a year. Besides, land acquisition has been made difficult, so it takes around 1.5-2 years to acquire land.

It has created a hurdle in the development of the country, which we are facing today. That is why energy transition is important. Another important element is India’s pledge to save the environment.


Energy Storage System (ESS) is the key to this transition. What are your plans?

We have already come out with a 1,000 MWh tender where bids have happened, which is around ₹10 per kWh. It is a bit high. So I have to give some subvention in order to make it practical. So we are working that out. To use already stored power, we will have to work out a VGF system or I will have to set up a separate product in the power exchange, which we are thinking about as well.

For instance, stored power will cost around ₹12.50 per unit. So we will introduce a product in exchange with no price cap, so gas-based power also can be traded there. Besides, I have asked officials to explore introducing a PLI scheme for manufacturing storage batteries.

The earlier battery PLI has manufacturing capacities for EV batteries. We want a battery of another chemistry that can store thousands of MWs of power. It will be a grid scale. Ultimately, we believe that if we add volumes, the prices will drop.


What battery technologies are you exploring?

There are two. One technology being developed is Sodium ion, which is supposed to be more amenable to use for grid-scale storage. Another chemistry developed in the US is again suited for grid-scale battery storage.

This technology is being used by China. I have asked officials to explore this because when they can offer a license to a Chinese company, then they can also offer this to us. If we do not do this, then we will lag in energy transition.


Another concern impacting energy transition are high prices of solar cells and modules. What are your plans here?

First is the capacities for which bids happened before the custom duty announcement (March 2021), which was made a year ago so that developers can buy modules and cells. But Covid struck and we had to give an extension. So now if they import they will have to pay customs duty.

We are discussing with the Finance Ministry for solution. We proposed grandfathering, to which the Ministry said that developers pay custom duty, which will be reimbursed. Another is Project Import, in which custom duty is now 7.5 per cent plus GST, which can be passthrough. We can adopt one of these options.

Now, there are bids that happened after the customs duty announcement. Here, the issue is that global prices have risen significantly. Developers say they are paying 41 US cents per unit, which is higher than the rates quoted in bids. They say that gives us a year so that manufacturing capacity increases, which in turn will help soften the prices.


India had expressed concerns about the draft EU proposals on manufacturing green hydrogen. What is the status?

I put forth India’s concerns in my speech at the EU-India summit in Delhi. By and large, the draft standards which thereafter were issued correspond to what we were saying. We urged them to review the proposals and they agreed.

You see, the world can transition only if we have one standard globally as green hydrogen can be generated only where you have enough RE and land. There has to be trade and transport of green hydrogen and ammonia and this won’t happen unless standards are uniform.

If we (India), Japan and Europe agree on standards, then green hydrogen and ammonia can be produced in India and transported to Japan, and Europe.