In India’s ambitious shift towards a cleaner energy landscape, the critical role of energy storage systems (ESS) is becoming increasingly evident, according to a collaborative report by the Institute for Energy Economics and Financial Analysis (IEEFA) and JMK Research & Analytics. Policymakers in India have acknowledged the significance of ESS in mitigating the challenges posed by the intermittent nature of renewable energy sources, particularly solar and wind.
The report reveals that over 8 gigawatts (GW) of ESS tenders have been awarded in India, with 60% allocated in 2023 alone. With the renewable energy sector experiencing exponential growth, the ESS sector is poised for substantial expansion. Battery-based ESS (BESS) and pumped hydro storage (PHS) are identified as the predominant and commercially viable solutions in India, while green hydrogen is expected to play an increasingly significant role in the renewable energy mix.
The Central Electricity Authority estimates a need for approximately 42GW of BESS and 19GW of PHS capacity by 2030 to meet the country’s evolving energy demands. Large-scale, grid-focused ESS projects, particularly those under the Firm and Dispatchable Renewable Energy (FDRE) tenders, are deemed crucial for the future. FDRE tenders, introduced in 2023, prioritize demand-driven profiles to ensure the reliability and dispatchability of renewable energy, presenting a promising model for both power developers and offtakers.
The report emphasizes the potential of FDRE tenders to replace traditional fossil fuel-based power generation, given the declining costs of renewable energy and ESS. Policy measures, including energy storage obligation (ESO) targets, viability gap funding (VGF) for BESS projects, and national energy storage and pumped hydro policies, are highlighted as supportive factors. However, challenges such as high initial capital expenditure, extended gestation periods, suboptimal infrastructure, and limited domestic manufacturing pose obstacles to ESS expansion. The authors stress the necessity of concurrent growth in ESS capacity to complement the surge in variable renewable energy (VRE) capacity, as India aims to increase its VRE installed capacity from 117GW to over 392GW by 2030.
