Energy storage systems (ESS) are vital for deepening renewable energy integration and enhancing grid stability. This month, a bid of Rs 44.7 lakh per megawatt (MW) per year was discovered for battery energy storage systems (BESS) under the Gujarat Urja Vikas Nigam Ltd’s (GUVNL) Tranche III bid. This marks a 66% reduction from the bid that won the Solar Energy Corporation of India’s (SECI) reverse auction in August 2022 and is 17% lower than the bid that won the GUVNL Tranche II in March this year. These BESS installations are planned for pre-identified Gujarat Energy Transmission Corporation extra high voltage substations. Potential applications include increased power integration in renewable energy-rich areas and energy arbitrage.
Over the past two fiscal years, interest in setting up ESS projects has surged. SECI’s reverse auction two years back had seen eight companies participating and was oversubscribed 5.5 times. The GUVNL Tranche III auction in June saw 13 bidders and an oversubscription of 7.8 times, while Tranche II closed with 8 bidders and was oversubscribed 3.8 times.
The increase in participation has intensified competition and driven down bids. Demand for batteries is also growing because of the steady rise in the sales and usage of electric vehicles and other applications.
Figure: Tariff discovered for energy storage tenders
Note:
i. Energy storage tenders are usually tied up on capacity basis; value per unit is calculated for the first year without considering any deration factor ii. Barring PCKL Karnataka (a pumped hydro storage project), the above bids are for battery energy storage
Source: Bridge to India-CRISIL Research
In addition to the procurement of energy storage as a service, discoms are investing in ESS to address diverse challenges. For instance, BSES Rajdhani has deployed a lithium-ion-based 510 kilowatt hour (kWh) /1050 kWh distributed BESS across six locations to mitigate overloading. Tata Power Delhi Distribution Ltd, too, has established a 10 MWh BESS to reduce Deviation Settlement Mechanism penalties and frequency regulations.
Given the decreasing cost of BESS, it is also essential to explore its adoption by consumers. In Madhya Pradesh, for example, high-tension commercial and industrial consumers pay a premium of 20% for energy use during peak hours (6 AM-9 AM and 5 PM-10 PM). This leads to an additional charge of Rs 7.50 – 8 per unit on the energy bill.
BESS integrated with renewable energy, meanwhile, can reduce costs considerably if individual consumers install such plants. Although batteries are often used for short-term energy storage, there are growing opportunities for long-term storage. Looking at the volume traded on ‘Green Day Ahead’ market (which facilitates trade in renewable power on a day-ahead basis) in 2023: around 18% of the transactions closed at Rs 8 per kWh or above, of which the majority occurred between 5 pm and 12 am, and 7 am and 10 am.
Figure: Volume traded on Green Day Ahead market in 2023
Note: Data sourced from IEX, which accounts for 94% of India’s short term transactions
Source: IEX, Bridge to India-CRISIL research
Long-duration ESS is also critical to increasing renewable energy penetration. Battery storage is ideal for short durations due to rapid response and high energy density; however, the current battery technology is less cost-effective for long-duration storage. Pumped hydro storage projects (PSPs), on the other hand, offer longer storage durations and lifespans. Despite their complexity and longer construction times (4-5 years), PSPs are crucial for renewable energy growth. The Central Electricity Authority’s optimal generation mix estimates the need for 19 gigawatt (GW) of PSPs by 2030, of which a capacity of 4.7 GW was operational and 4.1 GW under construction as of April 2024. In addition, about 60 GW of potential PSP capacity is under survey and investigation, necessitating accelerated development to meet future demand.
The adoption of energy storage solutions by discoms and consumers offers a promising avenue to address various challenges and reduce energy costs. As BESS becomes affordable, their adoption by a wider range of consumers can lead to significant savings and expand the renewable energy footprint.
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