Energy Storage in India – a perspective

Energy Storage in India – a perspective

The roadmap for assured supply of clean energy indicates the need for a clear-cut policy and regulatory framework for energy storage

New Delhi: With increased focus on climate change globally, there has been a shift towards renewable energy. India too is seeing a steady transition from fossil fuels towards renewable energy sources. With an ambitious target of achieving 40% of installed capacity based on renewable sources by 2030, energy storage appears to be the key to unlock the true potential of renewable energy and realize this target.

A greater dependence on renewable energy and greater integration of renewable energy with the grid is not without its share of problems. The intermittent nature of renewable energy and the limitations on its ability to ramp up and down based on demand lead to the waste of a certain amount of capacity. To counter this drawback, energy banking has been adopted in the past. However, this has, in turn, created several regulatory issues as banking directly impacts the financial viability of Distribution Companies, which have lately started curtailing banking facilities. Energy storage has the wherewithal to address several such constraints.Energy storage typically refers to the storage of previously generated electric energy for use at a later time. Energy storage systems vary in form and size depending on the type of stored energy and include batteries (capacity range of 100200 MW), pumped storage hydropower (capacity range of 250-1000 MW), flywheels (capacity range of 10-20 MW), and pressurized gas storage systems (capacity range of 0-180 MW). Apart from bridging the gap between demand and supply of electricity (and thereby increasing reliability), energy storage systems help minimize deviation from schedule.Unfortunately, various drawbacks impede the development of the energy storage sector. The absence of a regulatory framework for energy storage systems is one such hindrance, as acknowledged by the Central Electricity Regulatory Commission (CERC) in 2018 in its staff paper on Introduction of Electricity Storage System in India. A decisive regulatory framework is essential for attracting investments in this sector.Energy storage systems have a wide range of owners: generating companies, distribution licensees, transmission utilities, merchant power plants, bulk power consumers, or unrelated third parties. In this context, another challenge they face is the dependence of regulatory treatment on the ownership of energy storage assets which include market entry fee, cost recovery structures/mechanisms (pricing), grid integration, use of licensee’s assets, and revenue sharing. For instance, storage facilities owned by the transmission or distribution licensee may be used to maintain grid stability, to relieve congestions in the grid, and to shift conventional generation to meet peak demand. In such a case, profit would not be a motivating factor. A striking contrast would be if storage assets are used by generating companies in which case profit is a necessary consideration. Energy storage has the potential to reduce bulk/industrial consumers’ reliance on Distribution Companies as a back-up. However, such reduced dependence on Distribution Companies would increase the tariff for retail and domestic consumers, which will significantly impact the operations of Distribution Companies.The cost recovery mechanisms vary, depending on the ownership structure and the purpose for which storage assets are used. In case of dedicated use of the energy storage systems by the generating company or the transmission licensee, the cost of such storage system and that of service of energy storage can be considered in the tariff determination of the generating company or the transmission licensee.Such a structure has been considered by Solar Energy Corporation of India (SECI) which has invited bids for setting up of renewable energy projects with energy storage units. For conventional power generating companies, the cost of energy storage systems may be considered as part of the annual fixed charges of the generation station or through supplemental charges for the period during which such systems are mandated for use. As opposed to the aforesaid, if energy storage systems are for a non-dedicated purpose, the developer of such facilities could enter into multiple contracts with the proposed users for recovery of cost.

Another area of concern in respect of energy storage systems is the determination of the Appropriate Commission. A feasible solution would be to use the ownership structure as a basis for selection. For instance, in case bulk storage facilities are treated as an inter-state transmission asset, the CERC would be the Appropriate Commission, whereas if they are for a specific generating company, then the State Commissions may have the jurisdiction.Yet another challenge facing the energy storage sector in India is the need for provision of cost-competitive energy storage technologies. As stated by CERC, a reduction in costs needs extensive engineering research and development for new storage concepts and the requisite materials. Further, grey areas such as risk mitigation, controlling uncertainties at the early deployment stage, and operational uncertainties also need in-depth analysis for an informed grasp of
energy storage criteria.Although India has developed battery storage facilities, it currently lacks a central framework to regulate the use of energy storage systems. Like SECI, the Haryana Electricity Regulatory Commission has provided for setting up renewable energy projects (solar projects) with a provision for battery storage energy system in the Haryana Electricity Regulatory Commission (Rooftop Solar Grid Interactive Systems Based on Net Metering) Regulations, 2019 (HERC Regulations). The HERC Regulations mandate that the eligible consumer provides for 25% battery storage for any incremental capacity above 1 MW and up to 2 MW. Similarly, a few other states have also invited bids for launching a renewable project with a provision for battery storage. However, guidelines for potential investors who may want to tap into this area are yet to be framed.The India Energy Storage Alliance (IESA) has estimated over 70 GW and 200 GWh of energy storage capacity in India by 2022, which is among the highest in the world. However, the roadmap for assured supply of clean energy indicates the need for a clear-cut policy and regulatory framework for energy storage, similar to India’s policy on renewable energy, plus investment incentives, improved storage technology, and realistic targets for developing storage capacity.

[This piece was authored by VishrovMukerjee, Partner; Rohit Venkat, Principal Associate; and RaveenaDhamija, Senior Associate at J Sagar Associates][DISCLAIMER: The views expressed are solely of the author and does not necessarily subscribe to it. shall not be responsible for any damage caused to any person/organisation directly or indirectly]

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