Overview And Analysis – PLI Scheme On Advanced Chemistry Cell Battery Storage


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By Dhruv Warrior, Consultant, CEEW

India is projected to see demand for high-energy-density batteries grow exponentially in the coming years. Its growing electric vehicle (EV) sales and deployment of grid-scale batteries are the two main drivers shaping this attractive potential market. Yet domestic battery production is still at a nascent stage and needs to be scaled up. The government has taken a step in the right direction by approving a production-linked incentive (PLI) scheme to encourage investors to set up battery manufacturing plants in India, an ambitious move that promises to deepen the country’s integration in the global battery value chain. But if we hope to achieve true self-sufficiency and match the scale of other global players, this initiative should be the starting point for a broader policy framework.

The scheme in question – the National Programme on Advanced Chemistry Cell (ACC) Battery Storage – aims to support the commissioning of 50 GWh of high-energy-density and high-cycle-life ACC manufacturing capacity in India. The scheme’s total outlay of INR 18,100 crore (nearly USD 2.5 billion) will be disbursed over a five-year period as a percentage of the price of batteries sold. To promote value chain indigenisation, the programme requires manufacturers to achieve a domestic value addition of 60% in five years. It could encourage investments of up to INR 45,000 crore in the local production of not just ACC batteries, but also upstream cell components such as electrolytes and electrode materials.

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Still, the success of PLI is largely dependent on manufacturers’ appetite for the initial investment risk. The onus is also on the government to mitigate avoidable hurdles. For example, since some cathode materials (like lithium and cobalt) cannot be import-substituted, public entities like Khanij Bidesh India Limited must play a crucial role in ensuring that we have offtake agreements for these key supply-constrained minerals. India will also need to significantly ramp up production of ancillary parts to ensure that factories run without hiccups. We should incentivise MSMEs to contribute to pack assembly and component manufacturing by offering them financial support through attractive financing rates, capex support, or PLI schemes. 

Despite its attractive features, the PLI scheme for ACC battery manufacturing is not a silver bullet for scaling up the sector. While it can encourage a build-out of large “giga-scale” battery manufacturing, achieving cost parity with global players may take time. Further, India’s ACC capacity must far exceed 50 GWh to meet domestic demand and match a projected global production of 3 TWh by 2030. A CEEW analysis from December 2020 suggests that annual EV battery demand in India may increase to 158 GWh by 2030, while the Central Electricity Authority projects that grid scale storage capacity will have risen to 100 GWh by then.  Finally, India should rethink its technology-agnostic policy, which focuses primarily on energy density and cycle life.  It should also support the scale-up of recyclable technologies with lower critical mineral requirements and a good track record of performance in Indian climatic conditions. By maintaining a long-term vision, India can build on the PLI scheme and develop a truly sustainable battery manufacturing ecosystem.

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