Battery storage, hydrogen and coal-fired power generation as key grid firming options for India

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Battery storage, green hydrogen and flexible coal-fired power generation will help India overcome its next major challenge of incorporating large-scale intermittent renewable energy into the electricity grid over the next decade, according to a recent study by the Institute for Energy Economics and Financial Analysis (IEEFA).

The International Energy Agency (IEA) in its India Energy Outlook 2021 notes that India has the potential to become a world leader in battery storage, forecasting that it will add 140-200 gigawatts (GW) of battery power by 2040–the highest in any country and more than 100 times the amount deployed in the US today.

“The transition to low-cost, variable renewable energy generation requires a flexible grid that can respond rapidly to changes in power demand dynamics. Battery storage can provide a solution to help the grid manage massive amounts of intermittent wind and solar, provide dispatchable power during peak demand periods and other essential grid services. And battery cost deflation is now making utility-scale battery storage projects possible for India.”

Kashish Shah, research analyst IEEFA.

“Battery storage will likely play an important role in India achieving its renewable energy capacity target of 450GW by 2030. India already has 93GW of on-grid variable renewable energy and is targeting annual additions of 20-40GW.”

Kashish Shah, research analyst IEEFA.

The Central Electricity Authority (CEA) projects that solar and wind will make up 51% of India’s total installed capacity, or 420GW, by2030, with biomass and small hydro contributing another 30GW, while the IEA’s India Energy Outlook 2021 claims that India could add 900GW of renewable capacity by 2040.

Solar power is now the cheapest source of new Indian electricity capacity, and with record low tariffs of Rs1.99-2/kWh (US$~27/MWh) it is now below the marginal fuel cost of coal-fired power plants.

However, the study argues that coal is likely to remain a significant source of Indian electricity production for some time to come and indicates that the flexion of its generation to satisfy the majority of specifications for grid variability should be an important focus area.

“Flexible generation is characterised by the ability to rapidly ramp up and ramp down the generation, quickly start up and shut down and operate efficiently at lower generation levels.”

“Flexible coal-fired plants would require retrofitting, operational and regulatory amendments. This would incur capital costs as well as additional operational expenditure depending upon the size, age and combustion technology of the plant, but this could be rewarded with a higher time-of-day price.”

Kashish Shah, research analyst IEEFA.

The report calls for policy support for a time-of-day pricing mechanism to incentivise capital investment in key grid-firming solutions to ensure flexible, reliable peak-time power supply.

In the battery storage space, Shah says domestic and international developers as well as utilities are eyeing the very positive battery cost deflation trend but need to see a market signal in the form of time-of-day pricing to attract high initial capital investment into such assets.

The study also explores the experience of pioneers in the integration of large-scale renewables, such as Germany and the states of South Australia and California, in the sense of the Indian energy sector.

“While the much-bigger Indian market benefits from its strongly connected national electricity grid, it has its own set of challenges and market structure dynamics in dealing with large-scale variable renewable energy. But there are interesting lessons for India as renewable energy-rich states such as Rajasthan, Gujarat, Maharashtra, Karnataka and Tamil Nadu could see their shares of renewable generation increase to 50% by 2030 from the current levels of 10-30%.”

Kashish Shah, research analyst IEEFA.

Though yet to be commercially available in India, green hydrogen, produced by water electrolysis using renewable energy, has a wide range of potential applications in transport, industrial ammonia processing, methanol, steel and electricity storage, and is an opportunity that India cannot afford to ignore, says Shah.

According to The Energy and Resources Institute’s (TERI) recent analysis, the cost of alkaline electrolysers is projected to drop 56% from around Rs6.3crore/MW (US$0.86m/MW) today to around Rs2.8crore/MW (US$0.38m/MW) by 2030.

“Billions of dollars of capital commitments across the globe are building a critical mass in the green hydrogen space. So India will have the benefit of leveraging these learning-by-doing pilots that are underway in developed economies.”

“India’s strategy should be to plan in advance and be prepared to ride the energy storage wave when it arrives.”

Kashish Shah, research analyst IEEFA.
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