To achieve the Net Zero carbon emissions by 2070, India will need to focus on decarbonising its electricity sector, a policy paper brought by the Indian Institute of Management- Ahmedabad (IIMA). The exercise needs to be carried out well before that year, it said.

According to the policy paper, widespread electrification of end-use sectors, especially transport and residential and eventually low carbon and gree hydrogen production will lead to a rapid increase in electricity demand after 2050. However, the increasing corresponding carbon footprints of the power sector is not likely to happen. This is an area which needs immediate attention.     

Sources said that the Union Budget to be presented in February is likely to carve out a host of measures to address these issues. It is understood that the Budget may further incentivise companies seeking to put up storage facilities.

India, the third largest producer and consumer of electricity worldwide, has set a goal of sourcing 500 GW from non-fossil sources, and 41 GW of storage capacity by 2030.

Experts said that issues related to quick resolution mechanisms for land and forest clearance are the need of the hour, amid rising air pollution in several major cities, which has pushed the focus on expanding the public transport system as the main mode of commute.  

“The immediate challenges related to renewable electricity is the lack of adequate means to store it. We need to create storage  capacities so that we can have renewable energy as and when required—either at night or even during cloud covers,” Arun Goyal, former Member, Central Electricity Regulatory Commission who also served as secretary in the Cabinet Secretariat told The Secretariat.

Goyal added that India must also  boost measures to integrate renewable energy into the grid by augmenting flexible resources. "The flexible resources are necessary for balancing the grid during the peak hours of the day," he said.

The government is already looking to invite bids for building 10 gigawatt-hour (GWh) battery energy storage systems under the Production-Linked Incentive (PLI) scheme for manufacturing advanced chemistry cells (PLI-ACC).

The share of non-fossil-based capacity is likely to increase to 57.4 per cent by the end of 2026-27 and may further increase to 68.4 per cent by 2031- 32. It is about 46.5 per cent at present.

Discoms Disappoint

CRISIL ratings, part of S&P Global, said although auctions of storage projects have been ramped up, “progress on implementation has been tardy”. Though the state distribution companies (discoms) have improved compliance, they would also need to buy more renewable power.

"Slow adoption by discoms has been a key deterrent to implementation; 60-65 per cent of such projects had not got their power purchase agreements (PPAs) executed until May 2024," Manish Gupta, senior director, CRISIL ratings, said in a note.

Why Storage Infrastructure Is Critical

Storage systems are necessary for storing non-fossil fuel energy to be used during peak hours, ensuring continuous power supply, reduction of carbon emissions, deferral of transmission and distribution capex and promotion of energy arbitrage. India’s peak power demand stood at 249.85 GW in June.

Official data reveals that the total renewable energy based power generation capacity currently stands at around 203.18 GW, accounting for more than 46.3 per cent of the country's total installed capacity.

As per the National Electricity Plan (NEP) 2023 of the Central Electricity Authority (CEA), the energy storage capacity requirement is projected to be 82.37 GWh by 2026-27. Of this, 47.65 GWh will be supported by pumped storage projects (PSP), and 34.72 GWh from battery energy storage systems (BESS). This requirement is further expected to increase to 411.4 GWh (175.18 GWh from PSP and 236.22 GWh from BESS) by 2031-32.

Tarun Kapoor, adviser to the PM, recently said that the storage issue needs to be addressed at the earliest, and assured full policy support. However, the biggest roadblock is the issue of tax — GST on batteries attract anywhere between 18 and 28 per cent — on which, the Centre has little role to play. This issue will have to be looked at by the GST Council.

The dependence on imports of critical minerals used for energy storage is also a challenge.

Critical Mineral Supply Chain For Energy Storage 

The IIM-A research paper noted that if India plans to phase down coal in the next three decades, it will need to build adequate infrastructure for alternative sources such as nuclear power, in addition to flexible grid facilities and storage to support the integration of renewable energy.

Aluminium, lithium, copper, cobalt and nickel are among the most commonly used minerals for battery storage technology. Compared to the supply chain for fossil fuels, especially of oil and natural gas, the supply chain for these raw materials is more geographically concentrated.

Phasing down of coal will also enhance imports of critical minerals to “fulfil the needs of RE and battery storage sectors”. "Widespread electrification of end-use sectors, especially transport and residential and eventually low carbon and/or green hydrogen production will lead to a rapid increase in electricity demand after 2050 but not a corresponding increase in the carbon footprints of the power sector," the IIM-A paper said.

How China Solved Its Problem

China, which has positioned energy storage as a technology-thrust area, has now moved to a new-type of energy storage development, even though its utilisation has remained low. In 2023, for the first time, China’s total installed non-fossil fuel energy power generation capacity surpassed that of fossil fuel, reaching 50.9 per cent. The country’s energy storage market touched more than US$ 93.9 billion last year.

Bottomline-- India, with its stiff net zero target, will have to ramp up its energy storage facilities. It needs to come up with policies supporting battery recycling and grid integration to boost energy efficiency.