India has announced ambitious plans of setting up 500 GW of renewable energy capacity by 2030. This revised target (up from 450 GW previously) was announced by Prime Minister Narendra Modi at the Climate Change Conference (COP26) summit in November 2021, along with India’s goal of meeting 50 per cent of its energy from renewable resources by 2030. This will help achieve the country’s target of net-zero emissions by 2070.
To encourage large-scale renewable energy integration into the country’s power system, the government is working out a roadmap for the installation of battery energy storage systems (BESSs), which can support grid reliability. According to the Central Electricity Authority’s (CEA) report on the optimal generation capacity mix for 2029-30, India’s installed renewable energy capacity will include 27 GW/108 GWh (four-hour storage) of grid-scale BESSs by 2030.
The Ministry of Power (MoP) recently notified the “Guidelines for procurement and utilisation of BESS as part of generation, transmission and distribution assets, along with ancillary services”. The objectives of these guidelines are to facilitate the procurement of BESSs, as part of individual renewable power projects or separately, to address variability, firm up power supply, increase energy output, extend the time of supply from renewable energy projects, augment existing renewable power projects, and provide ancillary, grid support and flexibility services for the grid; enable optimum utilisation of the transmission and distribution network; ensure transparency and fairness in procurement processes and provide a framework for an intermediary procurer to act as an aggregator, trading licensee, implementing agency for the interstate/intra-state sale and purchase of power; and provide standardisation and uniformity in processes and a risk-sharing framework between various stakeholders involved in energy storage and storage capacity procurement, thereby encouraging competition and enhancing the bankability of projects.
In accordance with the guidelines, energy can be procured from BESS through competitive bidding for grid-connected projects to be set up on build-own-operate or build-own-operate-transfer basis. The minimum project size and bid capacity requirements for intra-state projects has been fixed at 1 MW while that for interstate projects is fixed at 50 MW. The guidelines are applicable to and binding on the BESS developer, procurer, intermediary procurer, end-procurer and implementing agency.
Eight key business cases have been identified for the utilisation of BESSs in energy supply and grid maintenance. These include:
- Renewable energy supply with BESS as part of the renewable energy project. The ownership of the renewable energy and BESS assets lies with the generator. These projects may also be utilised to meet the peak power and firm despatchable renewable power requirements of procurers.
- The use of BESS as a grid element is aimed at maximising the use of the transmission system, strengthening grid stability and saving on investment in the augmentation of transmission infrastructure.
- A BESS, with a fast ramp rate, is particularly suited for second-by-second management of interchange flows and therefore serves as an asset for balancing services and flexible operation. System operators, such as the National Load Despatch Centre, regional load despatch centres and state load despatch centres, may use BESSs for frequency control and balancing services to manage the inherent uncertainty/variations in load and generation.
- The distribution business model aims to maximise the utilisation of the storage asset and strengthen discom operations. BESS may be connected at load centres to help discoms in peak load management, grid resilience, portfolio management and flexible operations. BESSs can also be utilised to facilitate large-scale expansion of electric mobility.
- Standalone BESSs may be used for arbitrage operation by the developer/ owner or by the lessee, including merchant operation.
- The BESS developer/owner may sell storage space for a particular duration, in which case the developer will get capacity charges.
- In addition to the above models, procurers, intermediary procurers, beneficiaries or generators may also come up with any other suitable business cases.
- BESS developers may use a certain component of their project as merchant capacity and sell it in the power market as per extant regulations.
The guidelines will be applicable to all use cases except the first one. For renewable energy projects with BESS as a single project (co-located or multi-located), the respective standard bidding guidelines issued for procurement of power from solar, wind and hybrid power projects, or the unified standard bidding guidelines issued by the MoP will be applicable.
For other cases, the guidelines detail the bidding process, structure and award of projects including aspects such as invitation of bids and project preparedness. The latter includes the conditions to be met by the procurer with respect to bid documentation and site-related preparatory activities in case the site is specified by the procurer. The key documentation requirements for meeting project milestones for project sites selected by the BESS developer are also specified.
As per the guidelines, the procurer must prepare the bidding documents including the request for selection (RfS), the draft battery energy storage purchase agreement (between the BESS developer and procurer/intermediary procurer) and the draft battery storage sale agreement (between the BESS developer and intermediate procurer). The procurer must call for single-stage, two-part (technical and financial) bids. The technical bids will be opened first while the price bids of only those who qualify in the technical bid evaluation (as per the eligibility criteria set out in the RfS) will be opened subsequently. The bidding process should be completed within three months of the date of issuance of the RfS. The minimum term of the battery energy storage purchase agreement should be eight years from the date of project commissioning. The BESS developer is responsible for the safe disposal of all unit battery modules from the plant after their end of life, in accordance with the extant government rules.
The way forward
Until now, much of the tender-related activity has been focused on the deployment of small-scale storage projects. However, recent months have witnessed a shift in this trend with projects announced for large-scale projects as well. For instance, in January 2022, NTPC Renewable Energy, a wholly owned subsidiary of NTPC Limited, issued a request for proposal from developers to build interstate transmission system-connected energy storage systems with a capacity of 3,000 MWh and a minimum capacity of 500 MW anywhere in India. The energy storage installations are planned to be used to meet its round-the-clock renewable energy requirement under the service model. This came after the company’s expression of interest (EoI) invitation in June 2021 to set up 1,000 MWh of grid-scale battery energy storage systems at a single NTPC location or split across multiple NTPC power plants in India. Further, in October 2021, the Solar Energy Corporation of India called for EoIs for the procurement of 1,000 MWh of BESS as a pilot project.
There is a focus on not just deploying project capacity, but also scaling up manufacturing capabilities. To this end, the Department of Heavy Industry (MHI) released a detailed notification in June 2021 on the production-linked incentive (PLI) scheme, the National Programme on Advanced Chemistry Cell Battery Storage, for the implementation of giga-scale ACC manufacturing facilities. With an outlay of Rs 181 billion, this programme aims to achieve an ACC manufacturing capacity of 50 GWh. This was followed by a tender from the MHI to select manufacturers for setting up ACC production capacities for at least 50 GWh for energy storage under the PLI scheme, which was oversubscribed by 2.6 times with 130 GWh of capacity. Reliance New Energy Solar, Hyundai Global Motors, Ola Electric Mobility, Lucas-TVS, Mahindra & Mahindra, Amara Raja Batteries, Exide Industries, Rajesh Exports, Larsen & Toubro, and the India Power Corporation were among the 10 companies that filed bids for the tender. Finally, in March 2022, Reliance New Energy Solar Limited, Ola Electric Mobility, Hyundai Global Motors and Rajesh Exports Limited became the four firms selected for the PLI scheme for ACC battery storage. The selected companies will have to set up the manufacturing facility within a period of two years. The incentive on the sale of batteries manufactured in India will be disbursed thereafter over a period of five years.
Going forward, with the finalisation of the standard bidding guidelines for the procurement and utilisation of BESS and successful tenders, the Indian energy storage market is ready to take off on a large scale and assist in meeting the country’s renewable energy goals.