Energy Storage is Crucial to India’s Clean Energy Goals
Utility-scale battery storage systems are being deployed at a scale faster than most power sector stakeholders realize.
The need for energy storage stems from the fact that the power grid faces increasing instability. This is caused majorly by two reasons. Firstly, the increasing volatility on the supply side due to intermittent nature of renewables; and secondly by the rising unpredictability on the demand side as evidenced by high Deviation Settlement Mechanism (DSM) cost borne by distribution companies.
There are multiple ways to flex generation for addressing this problem of volatility, but none of these approaches can address it alone. Flexing hydro generation should be the first line of defense but has its limitations in India. It is a limited resource; there are agricultural and political constraints on dispatch and creating appropriate incentivization structure across states remains a hurdle.
Flexibility requirements through Battery Energy Storage and carbon footprint reduction:
In other parts of the world, gas power plants are used as flex resources. However, their impact in India is limited owing to the shortage of fuel. This has led to 15GW of gas plants being completely stranded, while another 25GW operate at less than one-fifth of their capacity.
Flexibilization of existing coal thermal plants is most commonly pointed out as the approach to carry the lion’s share of the burden of RE integration by several studies conducted in India. However, few of these studies dig deeper into the true cost and capability of coal plants to flex to integrate renewables.
Coal plants are designed to operate at greater than 90% of their rated capacity (plant load factor or PLF), but they do have the ability to be “ramped down” and operate at PLFs as low as 55%. However, when load factors drop below 90% fuel is burnt inefficiently and emissions increase. According to a recent CEA analysis, when the share of renewables on the grid exceeds the 175GW, coal plants will need to flex down to below 30% at certain times of the year. This is simply not achievable if we rely on coal for our flexing needs. Existing coal plants can be retrofitted to bring down the technical minimum from 55% to 40%, but not lower. Even this requires capital upgrades and increases operating costs. The cost increase is even more dramatic when you consider daily start-stop operations required to accommodate high solar generation in the afternoon at certain times of the year. Such daily start-stop or “two-shift” operations increase the cost of generation by INR 6.3 per unit, over and above the existing fixed and variable cost per unit of the plant.
While we have a sense of the increased cost of flexing coal, little attention is paid to the environmental cost. This is significant, as coal plant emissions, already the worst of all generators, worsen further when you reduce the PLF by flexing. It would be ironic indeed if we end up increasing overall emissions in order to integrate a larger share of clean, renewable resources. German coal plants are often advertised as examples of coal-flexing capability, but the German coal lobby’s emphasis on retaining coal by flexing it, is driving Germany to a 25% shortfall against its 2020 emissions target despite huge investments to increase in its renewable capacity.
Hence, while hydro, gas and coal will have some role to play in the integration of renewables, it is imperative that stakeholders in the Indian power sector realize the gap is bigger than what the existing resources are able to handle and take a closer look at the role energy storage can play.
Other Benefits of Battery Energy Storage:
Battery energy storage is widely acknowledged as having multiple benefits. First among them is versatility. Long called the swiss-army-knife of grid assets, a single battery storage asset can provide multiple benefits, including: peaking or daily load balancing, ramping, reducing deviation penalties (DSM benefits), renewable integration and smoothing, frequency regulation, congestion relief, spinning reserves, transmission and distribution deferral and black-start services. However, while these applications add significant value to the grid, India doesn’t have mechanisms to monetize or reward them. This is one of the biggest reasons battery systems have not been deployed more widely in India.
Secondly, containerization of battery systems enables rapid deployment. A grid-scale battery storage system in the 10’s or 100’s of MW capacity can be deployed in 6-9months. This is dramatically different from the time taken to develop other forms of flexibilization, such as gas peakers (3 years) or pumped hydro storage (5+ years). Moreover, a battery system is inherently scalable, so that users can start with a small outlay and add capacity dynamically. The advantage of these aspects cannot be overstated for system planners as they can now take decisions closer to operational requirement dates rather than betting on uncertain demand ahead of time.
In spite of these benefits battery storage is often dismissed as an untested-at-scale, high-cost technology. Both arguments, however, no longer hold true. Battery prices have fallen by 70% over the last six years and fully-installed system-cost is as low as INR 4 Cr./MW for four-hour systems (INR 1 Cr. / MWh) commissioned in 2027 and INR 5.5 Cr./ MW for systems commissioned in 2023. At these rates it is already cost-competitive with pumped storage systems which is a mature technology whose costs are only rising with inflation. When you compare the levelized cost per unit of daily 8 hours of flex power, coal costs INR 6.3, pumped storage costs INR 4.8 whereas battery storage costs INR 4.75. These numbers are inclusive of all capex, operations and maintenance cost including battery augmentation and account for difference in asset life. The gap between pumped storage and batteries widens further in 2027 as pumped storage costs increase to INR 5.6 while battery costs decline to INR 3.8.
After accounting for the still dropping costs and added benefits of locationality, low gestation period, greater DSM value, frequency regulation etc., battery storage is a no-brainer and should be more seriously and regularly considered as a tool in the system planner’s toolkit. Battery storage deployments over the last six years have increased at a phenomenal 80% year over year and 2018 saw more than 3GW installed globally. PG&E, a California utility recently procured 567MW (2270MWh) of battery capacity through a single RFP. These numbers go to show that battery systems have been tested and are already being installed at unprecedented scales across the world.
For all these reasons, it is imperative that power system planners & operators adopt a comprehensive view in evaluating the benefits of battery storage and take a closer look at the costs of deploying them.
Nishit Mehta - Vice President, Energy Storage, Sterlite Power