India aims to reach 500 GW of installed renewable energy capacity by 2030. To achieve this, the increasing share of variable renewable energy (VRE) sources demands enhanced flexibility within the power system to maintain continuous renewable energy supply amid fluctuating supply and demand.
To achieve grid flexibility, various methods can be employed, such as lowering minimum generation levels, cycling thermal plants strategically, optimising hydro resources, improving the accuracy of VRE generation forecasts, shifting agricultural demand to align with solar hours, implementing time-based tariffs and introducing demand response programmes.
Although setting up energy storage systems (ESSs) alongside renewable energy projects is often considered a costly option for ensuring a consistent supply of renewable energy, this strategy is essential for the effective grid integration of VRE. To this end, ESSs are typically considered after more cost-effective options, such as optimising generation and managing demand, have been explored. The National Electricity Plan 2023 anticipates a substantial ESSs requirement of around 336 GWh by 2030, encompassing 128 GWh from 19 GW of pumped storage plants (PSPs) and 208 GWh from 42 GW of battery energy storage systems (BESSs). Due to the high cost of ESSs, optimality can be attained by combining the use of both PSPs and BESSs in a bid to ensure a consistent supply of renewables. Both technologies have their own unique benefits and help strike a balance between the long-term cost efficiency and durability of PSPs and the quicker deployment of BESSs.
To address the challenges related to variable renewable energy, in August 2024, the Ministry of New and Renewable Energy (MNRE) released a concept note on optimising transmission and developing storage. It discusses the challenges of integrating standalone renewable energy projects and proposes several policy interventions to optimise the existing transmission system and incorporate more storage projects with renewable energy projects. These strategies are crucial as the sector shifts its focus from standalone project development towards round-the-clock (RTC) renewable energy supply. Renewable Watch provides an edited excerpt of the concept note…
Challenges in integrating standalone renewable energy
While several challenges are faced while integrating standalone renewable energy projects, the concept note highlights the issues linked to transmission infrastructure and the role of energy storage in mitigating these challenges. These include:
Grid stability: Large-scale solar projects concentrated in one area can lead to frequent grid disturbances. States such as Tamil Nadu, Andhra Pradesh, Gujarat and Karnataka have substantial VRE installations, but balancing their grids due to the variable nature of renewable generation remains challenging. ESSs can help mitigate such issues by stabilising the grid during these events.
In addition, the increasing penetration of VRE sources heightens the challenge of grid balancing during periods of low VRE generation. Without mandatory ESSs for VRE projects, managing this variability could become more complex, forcing states to rely on additional coal-fired power plants to meet peak demand during non-solar hours. However, strategically deploying ESSs can reduce the need for new coal capacity by providing power during these critical periods.
Suboptimal utilisation of transmission grids: VRE projects have low capacity utilisation factors (CUF). The CUF for solar installations typically ranges from 18 per cent to 23 per cent, while for onshore wind, it ranges from 20 per cent to 35 per cent. As a result, due to these projects, only a fraction of the existing transmission capacity is utilised. Co-locating ESSs with these projects can significantly enhance the use of these valuable transmission assets and also ensure RTC supply of renewable energy.
Underutilisation of inter-state transmission system (ISTS) during non-solar hours: There is a mismatch between peak power demand and solar generation. During non-solar peak hours, the transmission capacity built for solar projects often remains underutilised, leading to inefficiencies.
Challenges in expanding transmission infrastructure: Integrating more VRE sources into the grid requires expanding transmission infrastructure, which involves significant time and financial investment, as well as coordination among states and other entities. Securing right of way for new transmission lines is particularly challenging due to land acquisition and forest clearance hurdles. Inconsistent compensation policies across states can further slow the process. Additionally, the reliance on imports for critical equipment, such as cold rolled grain oriented steel and high voltage direct current (HVDC) substation components, can delay construction timelines.
Rising costs for evacuating renewable energy from Rajasthan and Gujarat: The growing cost of building new ISTS lines is a significant challenge for evacuating renewable energy generated in Rajasthan and Gujarat. Saturation of evacuation routes to nearby load centres, such as Delhi and Punjab, necessitates transmitting power over longer distances to load centres in states such as Uttar Pradesh, Maharashtra and Odisha. This requires longer transmission lines and potentially more expensive HVDC systems, driving up transmission costs and consumer tariffs.
All in all, ESSs help stabilise the grid by storing excess renewable energy when production is high and releasing it during times of peak demand, thus ensuring a consistent supply of renewable energy. They also play a crucial role in providing grid support services, such as maintaining frequency and voltage. By bridging the gap between fluctuating renewable energy sources and high electricity demand, especially when solar power is not available, ESSs reduce the need for fossil fuel power plants. Additionally, by managing excess renewable energy and releasing it as needed, ESSs enhance the efficiency of existing transmission lines and can even delay the need for new infrastructure.
Proposals made by the MNRE to promote grid stability
The challenges with integrating VRE can be solved through the greater uptake of ESSs. To this end, The concept note proposes that all new solar projects should include ESS. The latter’s capacity should be 25 per cent of the installed solar capacity. in the concept note.
Handling solar/non-solar power supply: The concept note states that solar plants without storage will now receive grid connectivity only during solar hours, instead of the entire 24-hour period. These plants will retain full rights to inject power up to their connectivity quantum during solar hours. Solar hours will be declared in advance by Grid Controller of India Limited (Grid-India). Existing solar plants can opt to add storage within 24 months to utilise connectivity during
non-solar hours; failure to do so will result in connectivity being reallocated as per new guidelines.
New renewable energy generating stations with storage can apply for additional non-solar hour connectivity using the infrastructure of already connected solar projects. New renewable projects will have full rights to inject power during non-solar hours, while solar projects will share grid infrastructure with agreed-upon charges. Existing solar projects can also apply for non-solar connectivity.
In FY25, 23 GW of standalone solar projects connected to the ISTS will be auctioned for renewable power supply during non-solar hours. Substation-wise availability of non-solar hour connectivity will be provided by Central Transmission Utility of India Limited (CTUIL). Targets will be set for renewable energy implementing agencies to call for bids for storage-supported renewable projects during non-solar hours.
Improving project CUF: A 50 per cent minimum annual capacity utilisation mandate will be implemented for all hybrid ISTS connections from October 1, 2026, onwards. CTUIL will grant connectivity based on the ability to utilise unutilised transmission capacity without exceeding overall limits.
Managing power evacuation: CTUIL, in consultation with Grid-India, will manage connectivity to avoid grid instability and additional transmission costs. The concept note further states that future renewable projects must include co-located storage equal to 15 per cent of the installed renewable capacity with a daily discharge duration of four hours. Meanwhile, ISTS transmission waivers will continue until June 2026. ISTS charges will be waived for the evacuation of renewable power during non-solar hours if the connectivity is exclusively for non-solar periods, helping to reduce consumer costs.
Incentives to promote ESSs: States with over 1 GW of solar capacity connected to the intra-state transmission system will receive viability gap funding (VGF) support of up to Rs 2.7 million per MWh to develop 5 GWh of BESS. Special allocations will be made for regions such as the Andaman & Nicobar Islands, Lakshadweep and Ladakh. States must sign BESS agreements by March 31, 2025, to qualify for the VGF.
Meanwhile, a total of 10 GWh of ESS will be added to support VRE integration through market mechanisms, with 1 GWh supported by VGF and the rest developed independently. ESSs will operate during peak demand to ensure grid stability, with potential losses covered by grid security charges. The Central Electricity Regulatory Commission will finalise regulations on grid security charges and the BESS balancing pool.
Mandates and other regulations: The concept note proposes that all new solar projects should include ESS. The latter’s capacity should be 25 per cent of the installed solar capacity. This mandate applies to projects commissioned from October 1, 2026, onwards. The ESS must have a four-hour daily discharge capability. In addition, deviation bands for renewables will be progressively tightened to encourage better day-ahead forecasts, thus incentivising the installation of storage systems by developers.
All in all, the MNRE’s proposals highlight the vital role of ESSs in stabilising the grid and optimising the use of existing transmission infrastructure. By adopting such measures, the Indian power sector can transition from VRE to RTC supply of renewable energy.
