Healthy pipeline and government push towards renewables boost adoption
India's renewable energy (RE) storage capacity is expected to surge 6 GW1 by fiscal 2028 from less than 1 GW operational as of March 2024, driven by a robust pipeline of projects under implementation and expected healthy pace of auctions. Such an increase is crucial to sustainably absorb the rising share of RE in the country's overall power generation mix.
Despite slow progress on project implementation, the government's push to develop RE power and tariffs for round-the-clock renewable energy, discovered in last two fiscals, being comparable with other sources of round the clock power - improves confidence around adoption.
Storage is becoming crucial with the rising share of RE - both solar and wind - in the overall power generation mix2. This is because RE generation by nature is concentrated, happening at specific times in a day. For instance, solar generation happens largely during daytime. Such a generation profile does not match with demand that typically peaks in the morning and evening.
Hence, to manage absorption of such a profile of generation, surplus generation must be stored and discharged at the time of requirement to keep the grid balanced.
To address this issue, the government is working on developing the infrastructure needed through standalone storage systems (such as pumped hydro or battery storage systems) and storage-linked projects that combine RE generation with storage.
The auctions of such projects have been ramped up. About 3 GW of standalone storage and ~10 GW of storage-linked projects with ~2 GW of storage were auctioned in the past two fiscals (vs less than 1 GW previously), resulting in a healthy pipeline of ~6 GW of storage as of May 2024.
Development of at least this much storage capacity would be required to sustainably increase the proportion of RE power to 20-22%3 in the overall power generation, as per government estimates.
Says Manish Gupta, Senior Director, CRISIL Ratings, "However, progress on implementation has been tardy. Slow adoption by state distribution companies (discoms) has been a key deterrent to implementation - 60-65% of such projects had not got their power purchase agreements (PPAs) executed until May 2024."
A major reason for the low traction is higher tariff (Rs 4.3-5.5 per unit) on these projects compared with other RE bids (Rs 2.6-3.2 per unit) because of additional cost of storage.
Going forward, it is expected that the government push to promote RE power and comparable tariffs of storage projects with other sources of round-the-clock power will provide a fillip to adoption.
The government aims to increase RE capacity to 450 GW by 2030 from 130 GW as of March 2024. To promote this, Renewable Purchase Obligations (RPOs)4 have been stipulated for discoms. They must increase the share of RE power from ~25% at present to 39% by fiscal 2028. This means discoms will need to buy more RE power and as its penetration increases, focus will sharpen on storage essential for grid balancing.
Says Ankit Hakhu, Director, CRISIL Ratings, "Though tariffs of projects with storage (Rs 4.3-5.5 per unit) are above the typical renewable bids (Rs 2.6-3.2 per unit), they are comparable with that of other round-the-clock sources, including tariffs discovered through medium-term power purchase agreements of coal thermal plants (~Rs 5 per unit in fiscal 2024). This further provides confidence on increase in traction of signing of PPAs." |
