"With Recent Advancements In Energy Storage Technology, How Will Indian Solar Sector Shape Up?"
Mr. P. Vinay Kumar, Chief Operating Officer, Greenko Group
We are at the very early stages of a Energy storage revolution. It is pretty early days for us to ponder over the effect of increased energy storage in the Grid and impact on the growth of Solar Installed capacity in India. If we were to look at other markets, like the US which installed 700 MWH of batter storage in CY 2017, most of it has gone into two markets. Largest offtake has been in the Commercial and Industrial Segment with the residential segment coming a close second. Grid applications have been far and few between, and utilities are just looking at storage deployments. Utilities in California and New York have just come out with some interesting schemes to incentivize storage deployment and we expect this to lead the initiallarge scale deployments next year. If one were to look at the applications where this 700 MWH has been deployed , in case of the residential segment it has been mainly behind the meter applications , to increase reliability and mainly for backup applications. For C&I customers , the application has been mainly to reduce demand charges. So if you see, the initial spurt in demand for storage is happening independent of solar capacity in advanced markets. Grid applications are just beginning to take off. It is important to realize that Energy storage offers some services to the Grid . it could be frequency management, RE firming / smoothing, T&D investment deferral, time shifting etc., In mature power markets these services are priced in the electricity markets , which in turn create viable use-cases for storage deployment. In the absence of Power market maturity in India , I do not see private deployment of storage taking off in a big way for now. The initial demand and deployment will be Utility owned as we can see in the first lot of tenders have been issued by NTPC, NLC and other PSUs. While acknowledging the role of storage in firming up intermittent Renewable power ,at this point of time , it is difficult to come up with business cases for solar storage hybrids to leverage the synergies that such a combination will bring to the Grid. Also the regulators would need to warm up to the potential that Storage offers to the Grid and put in place enabling market mechanisms that can price Grid services. Too often policy and legislation gets tempted to choose winners. It is essential that we drive growth of these new technologies in a technological agnostic manner, and purely by market mechanisms. Regulators play a key role here. Given the current cost structure of storage , it competes well with Diesel based power and so in offgrid applications and in island grids it does make immediate sense. If the penalties for forecasting and scheduling for solar plants go up from their current level, there might emerge a few cases for deployment.
Mr. Guru Inder Mohan Singh, Director and COO Amplus Solar
Storage is meant to bring stability to an infirm life. However, it is bound to make infirm RE more exciting and moreso solar, considering that it has both the distributed and large (as other RE) versions. In my view, the impact on residential solar and open access projects would be the most exciting.
Distributed solar on unreliable grids or off grids will both flourish with storage prices coming down. On-grid versions will include residential solar and small commercial sectors, for example- telecom towers, petrol pumps, toll plazas, highway restaurants and off-grids versions will include border posts, islands, micro-grids, resorts. The last mile infra in Indian grid will continue to have reliability issues, especially in Tier 3 towns and this is where energy storage, sold as part of solar kits, will grow as DIY systems or through local distributors.
Large solar will include Discom sale and private sale projects. Sale – to – Discom projects will benefit from a reliable grid that will be supported by energy storage, either as frequency regulation support or if the grid operator decides to add energy for storage and hence absorb energy and consequently expand the ulitization of grid infrastructure. The impact on open access projects, in comparison, will be very different. Open access projects bank on “banking”. Banking regulations allow these projects to store their generation into the grid bank, from which their customer can withdraw energy as and when required. The bank’s passbook is the customer’s monthly electricity bill which reflects the deposit and withdrawal from the grid bank. Unfortunately, the grid owner (Transco) is a not-so-distant-cousin of the Discom and Discoms are not really fond of open access projects for the simple reason that these projects take away their creditworthy commercial & industrial consumers. And therefore, the banking regulations may change or even vanish. And because open access projects have been or will be setup under policies that provide 10 to 15year certainty on banking, they would be left with 10 to 15year project life but no banking facility. It is at this point, that energy storage will move in and create a new business model, where on-call and dispatchable power will be available for sale.
As should be obvious from the above, energy storage is a toll of free markets, bringing power to consumer, away from regulations.
Mr. Vinayak Kathare, Senior Manager - New Initiatives Fourth Partner Energy
In the distributed solar market, the adoption of energy storage will be driven by microgrids for rural electrification, diesel replacement for cost savings and need for environment friendly power generation. State governments should also promote behind-the-meter energy storage to reduce peak demands, smoothen out the variability and bring stability to the grid. From the supply side, the adoption is getting accelerated by technological advancements such as increasing efficiency and cycle-life of both Lead-Acid and Lithium-Ion batteries, globally reducing costs of Lithium-Ion batteries (73% reduction from 2010 to 2016), and innovations in battery management systems.
Looking at the cost economics for diesel replacement, the cost of energy provided by solar plus storage is close to INR 14 per kWh with typical VRLA Gel batteries. Compared to the unit cost of diesel power generation, which range between INR 19 to 21 per kWh, the solar system with storage offers a compelling saving of INR 5-7 per kWh.
The total cost of ownership still favours VRLA Gel batteries over Lithium-Ion batteries; however, that will change in next couple of years as the prices of Lithium-Ion batteries reduce further. Even today, applications where faster discharge rates are required and space availability is a constraint, Lithium-Ion batteries have an advantage over Lead-Acid batteries.
One major hurdle in adoption of solar with storage is the upfront CAPEX associated with the batteries and incremental costs of hybrid inverters over grid-tied inverters. To tackle this problem, service providers will have to provide OPEX or a combination of CAPEX and OPEX model to the customers, and companies having strong financing abilities will do well in this segment. Service and maintenance requirements would also go up with storage and customers should choose EPC companies with strong servicing ability to alleviate this concern.