Power storage demand in India is expected to expand rapidly to stabilise the increasing variability on the power supply side – from rising renewable generation – and the demand side, says a report by Fitch Ratings.
Increasing power generation from renewable energy, which is intermittent, will raise supply-side variability, and a higher proportion of electricity demand from residential, agriculture, and commercial consumers will add to the intra-day demand volatility, it said.
Renewable energy coupled with storage solutions can be used to provide round-the-clock power, satisfying the robust industrial demand, especially in an environment where industries are looking to lower their carbon footprint.
Grid stabilisation is another area that necessitates an increase in energy storage investment, as rising ramp-up requirements during peak hours make it difficult to keep the grid frequency within the band required under India’s Electricity Grid Code.
Thus, investments in power storage will be crucial to stabilise rising electricity generation.
Hydro storage projects
India’s fledgling power storage market is dominated by pumped hydro storage projects. Only 3.3GW of pumped hydro storage projects are operational in India, even after the first project was taken up in 1970, against CEA (Central Electricity Authority) estimates of a potential 96GW of capacity across India.
Slower progress in the past was resulted from a lack of clarity on policies related to payments for storage facilities and social and political issues linked with the acquisition of agricultural and forest lands, and relocation compensation for the affected population, especially for the large hydropower projects.
However, the storage capacity is set to expand faster because of increased demand, development interest from the private sector and recent tenders. “The pace of development of India’s power storage market and the use of storage technologies will depend on factors like power demand curves, the share of renewables in the generation mix, cost of storage technologies and efforts on demand-side optimisation to reduce peak requirements,” says Girish Madan, Fitch Ratings.
In its optimal mix study in 2020, CEA estimated a storage capacity of 10.1 GW of pumped hydro and 27GW battery storage – providing four-hour storage – by 2030.
Fitch Ratings expects most of the investment in storage to come from the private sector, much like renewable generation capacity, where the private sector owns 70 per cent of operating capacity (including large hydro >25MW) and 96 per cent, excluding large hydro. Government-owned entities will act as nodal agencies and intermediate counterparties.
Pumped hydro storage and lithium-ion batteries are the two commonly used technologies for electricity storage, based on the current costs and technological development level.
Storage attached to a power generator can stabilise renewable generation, energy arbitrage and meet peak demand. This type of storage investment is easy to quantify based on the cost-benefit analysis. Fitch expects colocation with a generator will be the form, where largescale storage investments will happen, considering that the increase in storage demand over the past decade has been broadly underpinned by increasing renewable generation.
A transparent operating environment, including clarity on the government’s long-term policies, is paramount to support the pace of storage investments, especially considering the scale, associated investment costs and long operating life of storage assets, it said.
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