Chennai: In order to achieve the renewable energy targets, battery energy storage systems will require an investment of around Rs 1.4 lakh crore for capacity addition by 2030.
The renewable energy (RE) capacity in India is projected to rise significantly over the current decade, increasing its share to 40 per cent of total electricity generation by FY2030. Achieving this ambitious target will require robust energy storage systems (ESS) to address the intermittency of wind and solar power.
At present, ESS deployment is primarily driven by Battery Energy Storage Systems (BESS) and Pumped Storage Hydropower (PSP) Projects. ICRA expects the energy storage sector to require an investment of around Rs. 1.4 lakh crore for BESS capacity addition by 2030.
Over the past decade, global battery pack prices have fallen to record lows, making battery energy storage systems (BESS) far more cost-effective and driving down tariffs for standalone storage as well as solar-plus-storage projects. Additionally, the government support through Viability Gap Funding (VGF) scheme for a cumulative capacity of 30 GWh and government’s mandate for new solar projects to include at least 10 per cent storage capacity has resulted in competitive tariffs to gain momentum in this space. This is further supported by the growing need for grid stability and peak load management as renewable penetration rises, positioning BESS as one of the key elements in India’s clean energy transition.
Based on prevailing battery costs, the levelised storage cost using BESS for 2 hours to 4 hours of storage is estimated to be relatively high in the range of Rs 4-7 per unit against Rs 5 per unit in case of PSP projects. Nonetheless, this has reduced from the level of over Rs 8-9 per unit seen in 2022. Storage cost remains high for BESS for 4-hour storage compared to PSP.
Key risks for BESS implementation include a limited track record of successful execution, minimal domestic manufacturing capacity, and a shortage of large-scale EPC players. These factors increase dependence on overseas vendors, thereby amplifying execution risks. Furthermore, heavy reliance on imported lithium-ion components exposes projects to supply chain disruptions and potential cost escalations.
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