The levelised cost from pumped storage projects (PSP) is around ₹4.7 per unit compared to that from battery energy storage system (BESS) at around ₹6.6 per unit, making the former more preferable from a cost point, CareEdge said on Tuesday.

The ratings agency in a report said assuming that the requirement is to supply 20 hours of renewable energy (RE) in a day — a Capacity Utilisation Factor (CUF) requirement of over 80 per cent annually, which is to be met through a combination of variable RE (VRE) and storage component — a relative comparison between PSP and BESS has been done.

“It has been assumed that power from ESS will be supplied for 6 hours a day and VRE will be used for the remaining 14 hours. The levelised cost from PSP comes to be around Rs 4.7 per unit whereas the levelised cost from BESS comes to be around ₹6.6 per unit. Thus, at present, especially if one has to provide storage for longer durations, PSP is preferable from a cost standpoint,” it added.

The agency said that assuming the requirement of round-the-clock (RTC) supply of RE, the landed cost from PSP is around ₹4.74 per unit as against ₹6.59 per unit from BESS.

On energy storage system (ESS) requirements, it projected that assuming four hours of storage per gigawatt (GW), India will require around 12 GW storage capacity in FY24, which is likely to increase to about 70 GW by FY30.

Financial viability

However, the balance can change if there is an introduction of voluntary gap funding (VGF) or other capital incentives on BESS beyond the existing VGF as well as a reduction in duties and taxes on batteries, the agency opined.

Moreover, PSPs given their longer gestation are prone to witness time and cost overruns. This coupled with a reduction in battery prices can swing the balance between both technologies, it added.

CareEdge Ratings Senior Director Sabyasachi Majumdar pointed out that introduction of several policy measures by the government including renewable purchase obligation (RPO) and energy storage obligation (ESO) targets, guidelines for promoting PSPs and introducing VGF for BESS indicates the government’s seriousness about achieving 500 GW non-fossil fuel capacity by 2030 while also ensuring grid stability.

“The investor interest in this segment also remains buoyant with multiple large groups winning capacities in various storage auctions. However, from a financial viability standpoint, the country needs to cover some distance as BESS which is modular in nature is not as cost effective as PSPs and the latter has its inherent challenges including dependence on location, high gestation period etc,” he added.

Comparing PSP & BESS

BESS has lower land requirements, and is agnostic to the project site characteristics. It can also be utilised for distributed generation. Yet batteries are exposed to disposal related challenges whereas PSPs offer a sustained and much cleaner alternative, CareEdge said.

PSPs on the other hand have a longer project life and are accepted worldwide as an established technology. It is also more cost-competitive.

However, these projects are customary to witness escalations given the longer gestation periods and exposure to varying commodity prices. Besides, PSPs are also exposed to rehabilitation and resettlement related challenges as they require contiguous parcels of land for setting up, it added.