Opinion piece by Animesh Damani – Managing Partner, Artha Energy Resources (AER)
The Energy Storage Solutions (ESS) market has various well-defined consumers, such as Electric Vehicles (EVs), Solar & Wind developers, individuals with remote access to electricity and the ones dependent on generator sets. These are just the obvious uses of energy storage. To put things into perspective, energy storage devices can power the 253 million+ vehicles currently traversing the roads of India. However, if India must take advantage of the ESS revolution, one needs to draw inference from the inception of the global solar energy market. Contrary to popular belief, Germany is to be credited for the creation of the solar market. The focus shifted to China as it created a sustainable ecosystem, by growing the number of manufacturers and simultaneously creating an internal demand for RE consumption, through incentives and removal of barriers. Eventually, the Chinese solar market achieved a significant scale, which cast a shadow over German solar operations. Today, 90% of the solar panels supplied globally are of Chinese origin. If India must establish a workable ESS model, then it is advisable that we take some inspiration from the successful Chinese solar energy policies.
However, investing in energy storage devices is an expensive affair. The EPC cost of battery storage is expected to touch $250 – $270 per kilowatt hour, which is extremely high. But investment in the required technology is critical. While expensive at the onset, the apt technological production and scale is likely to reduce this cost by one fifth and bring it down to approximately $50 within a span of a couple of years (mid-term). Simultaneously, the current fad of EVs is also bound to create more demand for ESS, thereby kicking in the concept of economies of scale.
The economies of scale can be adopted through substantial support in the production and demand segment by the Government.
The government’s current subsidies such as the Performance Linked Schemes aren’t enough to spurt growth in the battery manufacturing segment as the investment commitment outweighs the probable future incentives. Rather, the authorities need to focus on securing more raw material such as Brine, at affordable costs, that will facilitate the production of Lithium Ion. Secondly, the government should aggressively pursue more manufacturers – from various segments of the energy storage supply chain – to be part of the ecosystem. Currently, while a handful of companies have indicated their intent to “manufacture” batteries, the fine print of the operations clearly indicate that will be simply “assembling” the final product in India, while importing the parts. The government must implement a transitional shift from “Assembling in India” to actually “Making in India”, to make a noteworthy impact and ensure the rightful claim to the $50 billion investment opportunity, rather than China.
Consumption patterns play a key role in deciding the future of any business segment. Hence, the authorities must offer a boost in the policy that will encourage energy storage adoption – from a rooftop energy consumer (C&I and residential segment) to a solar developer with RE assets. Incentives such as capital & interest subsidy and encouraging price dynamics in the sale of power, will play a crucial role in bolstering the ecosystem. Currently, the sale of power by ESS owners is controlled by DISCOMs and limited by licensing, thus hindering the profitability. Whereas the ideal framework should allow entities with solar storage solutions to sell power freely which will be viable only through a free market mechanism. Ergo, it is safe to indicate that a de-licensing policy by the government will generate demand and give rise to budding entrepreneurs in the sector, thus creating a win-win situation.
By Animesh Damani – Managing Partner, Artha Energy Resources (AER)