India’s US$455m Subsidy Scheme for Battery Storage Projects

June 15, 2023 Posted by India Briefing Written by Melissa Cyrill Reading Time: 5 minutes

India is seeking to facilitate the production of 4,000 MWh of battery storage by providing grants and subsidies under the scheme. Such projects will contribute to India’s efforts to grow its renewable energy capacity to 500 gigawatts (GW) by 2030. Additionally, the scheme aims to reduce the cost of battery energy storage from the existing range of INR 5.5-6.5 (US$0.067-0.079) per unit.

Available information on the scheme

Per recent media reports, the Indian government has said that it will provide incentives totaling INR 37.6 billion (US$455.2 million) to companies undertaking battery storage projects. Earlier this year, the government revealed plans for battery storage projects with a total capacity of 4,000 megawatt hours (MWh); specific details of the scheme remain unknown per a Reuters report that cites government sources.

The primary objective of this scheme is to promote battery storage projects in the country, considered important to meet India’s ambitious target of expanding its renewable energy capacity to 500 gigawatts (GW) by 2030. The scheme will cut the cost of battery energy storage from the current range of INR 5.5-6.5 per unit. It will also foster the development of large-scale battery energy storage systems by encouraging competitive bidding to drive down costs. The government anticipates the scheme will generate private investments worth INR 56 billion (approx. US$680.47 million) through this initiative.

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Battery storage plays a critical role in stabilizing the power grid by backing up intermittent renewable energy supply. They are capable of storing excess solar energy generated during low grid demand periods and subsequently supplying it to the grid during peak demand hours. There are only a limited number of large-scale operational projects worldwide due to the evolving nature of the technology.

According to insider sources, the government intends to provide viability gap funding incentives to cover the risks associated with economically unviable critical infrastructure projects. These incentives will be in the form of grants disbursed over a three-year period. The disbursement of these contracts will occur in five installments until the financial year 2030-31, and the selection of recipients will be based on a competitive process, with preference given to the lowest bid.

Alok Kumar, the Power Secretary, emphasized India’s commitment to energy transitions and meeting the energy security needs of its population. He stated that the battery storage scheme is a significant step towards achieving these goals, as battery storage systems are an integral part of facilitating the energy transition.

The report also suggested that several prominent Indian conglomerates, including Reliance Industries, Adani Power, and JSW Energy, have expressed intentions to establish large-scale battery plants.

Sector opportunities

A study published in January this year by the Institute for Energy Economics and Financial Analysis (IEEFA), a US-based think tank, revealed that India has several upcoming battery energy storage system projects.

Date	Company	Project details	Capacity	Output
Jan 19, 2023	Solar Energy Corporation of India	Two storage projects awarded to JSW Energy	500 MW	1,000 MWh (backup power for 2 hours)
Dec 2022	Greenko Energy	Secured National Thermal Power Corporation Limited’s tender	3,000 MWh	–
Last year	NTPC Renewable Energy Ltd	Standalone battery storage project announced	250 MW / 500 MWh	–
–	Various Companies	Hybrid projects combining storage with solar and wind	–	–
–	Gujarat Urja Vikas Nigam	Hybrid project tender highlighted	500 MW	250 MWh (peak demand for 6 hours)

Source: DownToEarth, IEEFA

The IEEFA study stated that the market for BESS/storage assets in India is poised to experience exponential growth in the next few years. A single BESS asset offers multiple value streams, and as the market develops, technology advances, and financing improves, numerous foreign investment opportunities will arise.

Further, The India Energy Outlook 2021 by the International Energy Agency projects that by 2040, India could potentially have the largest battery storage capacity of 140-200 gigawatts (GW), surpassing any other country.

Notable battery energy storage projects in India

AES-Mitsubishi Rohini – Battery Energy Storage System: Located in Delhi, the AES-Mitsubishi Rohini – Battery Energy Storage System is India’s first grid-scale battery-based energy storage system (BESS). The 10-Megawatt (MW) ESS is owned by AES and Mitsubishi Corp. and installed at Tata Power Delhi Distribution’s Rohini substation. It uses Advancion Technology from Fluence, which is jointly owned by Siemens and AES.
Modhera Sun Temple Town Solar PV Park – Battery Energy Storage System: Modhera in Mehsana, Gujarat has transformed into a fully solar-powered town, utilizing a 6MWp photovoltaic system combined with battery storage to provide round-the-clock electricity. Mahindra Susten selected GreenPowerMonitor Power Plant Controller (GPM PPC) and Energy Management System (EMS) solutions to incorporate advanced functionalities and a tailored control approach for this hybrid project, which also includes a 15MWh BESS. GPM is a leading provider of data-driven digital solutions for renewable energy plants.
Phyang Solar PV-Battery Energy Storage System: The 50 MWp Phyang Solar PV Plant with a 50MWh BESS was expected to commence commercial operations in March 2023. The project will be the first co-located Large Scale BESS solution in India and the first Large Scale Solar PV Project in the Union Territory of Ladakh. It is situated at a high altitude of 3600 meters above sea level. Tata Power Solar, the largest solar energy company in India and a wholly owned subsidiary of Tata Power, was awarded the bid to construct the project. The scope of work for Tata Power Solar encompasses the design, engineering, supply, procurement, and construction of the Solar Photovoltaic grid-connected power plant project and BESS on a turnkey basis. Additionally, the company will provide ten years of operations and maintenance services. China’s Sungrow Power Supply Co., Ltd. provided the necessary photovoltaic and energy storage system (ESS) solutions. Sungrow has a manufacturing presence in Bengaluru, Karnataka with its 10GW solar inverter factory.
BESS Project by IndiGrid: Announced in April this year, India Grid Trust said it commissioned its first BESS project, which is linked to solar panels, at the Dhule substation in Maharashtra. According to a statement from the company, the project will fulfill the auxiliary consumption needs of the substation.

National policies supporting battery energy storage system (BESS) projects in India

Bidding guidelines: On March 11, 2022, the Ministry of Power (MoP) notified bidding guidelines for the procurement and utilization of BESS, establishing provisions to enable their implementation.
Draft National Electricity Plan: Released in September 2022, the plan emphasized the significance of battery storage in India’s energy mix, particularly in reliance on renewable energy. Projections were made for 51.5 GW of BESS installations by 2031-2032.
Ancillary services regulations: In January 2022, the Central Regulatory Electricity Commission formulated new regulations for ancillary services, crucial for maintaining grid voltage and frequency within safe limits. BESS plays a key role in balancing intermittencies of wind and solar power.
Interstate transmission charges waiver: On June 21, 2021, the MoP ordered the waiver of interstate transmission system charges for battery storage and pumped hydro systems commissioned until June 2025. This facilitates seamless supply across states.
Renewable purchase obligations (RPO) trajectories: On July 22, 2022, the MoP issued RPO trajectories until 2029-2030, which, for the first time, included energy storage obligations trajectories until 2029-2030.
Production Linked Incentive (PLI) Scheme: The PLI scheme incentivizes the development of a localized value chain for the battery industry. Under the National Programme on Advanced Chemistry Cell (ACC) Battery Storage, INR 181 billion (US$2.49 billion) in financial allocations have been made. The program is designed in such a manner that it is technology agnostic. The beneficiary firm shall be free to choose suitable advanced technology and the corresponding plant and machinery, raw material, and other intermediate goods for setting up cell manufacturing facility to cater to any application.

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