India’s renewable energy storage capacity is projected to increase to 6 GW by fiscal 2028, up from less than 1 GW operational as of March 2024, according to a statement by Crisil Ratings on August 14.
The Indian government is focusing on developing infrastructure through standalone storage systems, such as pumped hydro or battery storage, as well as storage-linked projects that combine renewable energy (RE) generation with storage. In the past two fiscal years, auctions for storage projects have accelerated, with about 3 GW of standalone storage and around 10 GW of storage-linked projects, including 2 GW of storage, being auctioned.
This has resulted in a pipeline of 6 GW of storage as of May 2024. Crisil noted that this capacity is essential to increase the share of RE power to 20%-22% of overall power generation, as per government estimates.
Despite the promising outlook, Crisil highlighted the slow progress in project implementation. Manish Gupta, Senior Director at Crisil Ratings, pointed out that sluggish adoption by state distribution companies (discoms) has been a significant barrier, with 60%-65% of such projects lacking executed power purchase agreements (PPAs) as of May 2024. The higher tariffs associated with storage projects, ranging from Rs 4.3 to Rs 5.5 ($0.051-$0.066) per unit, compared to other RE bids of Rs 2.6-Rs 3.2 per unit, have also been a deterrent.
Looking ahead, Crisil expects that the government’s push to promote RE power and align storage project tariffs with other sources of round-the-clock power will boost adoption. With thermal coal-fired plants’ medium-term PPAs at about Rs 5 per unit in fiscal 2024, comparable tariffs for storage projects could become more attractive.
India aims to increase its RE capacity to 450 GW by 2030, up from 130 GW as of March 2024, with Renewable Purchase Obligations (RPOs) stipulated for discoms to encourage the purchase of more RE power. Discoms will need to increase the share of RE power from about 25% to 39% by fiscal 2028, and storage will be critical for grid balancing as RE penetration grows.
Last week, London-based energy think tank Ember emphasized that Indian developers and independent power producers must evolve their structures, along with the PPA and tender landscape, to meet the challenges of the next stage of the energy transition. Ember advised developers to have a clear market price outlook and quantify market risks to competitively price the next-generation PPAs.