A recent analysis by Ember and TERI emphasizes the pivotal role that declining Battery Energy Storage System (BESS) costs will play in the effective phase-down of coal in India’s power sector. The report outlines a projected pathway for reducing coal dependence, dependent on the rate of cost reductions for energy storage technologies.
The analysis presents a three-stage process for the coal phase-down in India. Initially, coal generation growth is expected to slow as renewable energy (RE) infrastructure expands. This is followed by a plateau in coal generation as the costs of RE and storage technologies become more competitive. Ultimately, the report anticipates a decline in coal generation as RE combined with storage becomes more cost-effective than existing coal plants.
Current data indicates that if BESS costs continue to decrease at an annual rate of 7%, coal generation in India is likely to plateau until 2032. Additional coal capacity might still be necessary to meet demand during periods without solar energy. However, if BESS costs decrease by an average of 15% annually, India could potentially limit its coal capacity to the 260 GW projected in the 14th National Electricity Plan by 2032.
Mr. A.K. Saxena, Senior Director of Electricity and Renewables at TERI, highlighted the critical role of energy storage in achieving electricity decarbonisation. “Energy storage holds the key for decarbonisation of electricity generation; reduction in cost of various storage options would accelerate the energy transition in economies,” Saxena stated.
The report suggests that no new coal plants might be necessary if BESS costs, excluding finance, drop to approximately Rs 6 million/MWh. Despite recent significant declines, BESS costs must fall by over 50% from current levels to avoid new coal capacity, particularly to address non-solar demand.
Neshwin Rodrigues, Electricity Policy Analyst at Ember, emphasized the need for strategic planning. “Planners will now need to consider strategies for shifting solar generation to non-solar hours to ensure that the pace of the transition does not slow down,” Rodrigues said. He also noted the importance of increasing renewable energy capacity, securing financing, and enhancing the flexibility of coal plants.
Ember’s analysis indicates that by 2032, renewable energy could supply up to 83% of electricity demand during daytime but only 38% during non-solar hours due to current storage constraints. The construction of new coal capacity poses risks, including potential underutilisation and lock-in if BESS costs decline more rapidly than anticipated.
Nayeem Khan, Research Associate at TERI, underscored the need for accelerated growth in solar and wind energy, development of pumped hydro projects, and the advancement of cost-competitive low-carbon technologies like BESS to avoid new coal capacity.
The report also calls for policy interventions, such as Viability Gap Funding, to facilitate the necessary reductions in battery costs. It highlights the importance of shifting solar generation to non-solar hours and enhancing coal plant flexibility to maintain the transition pace.
This report is part of a series that explores key drivers for accelerating the power sector transition in India, offering valuable insights into how declining battery costs can help reduce coal dependency and guide policymakers and global stakeholders in prioritising decarbonisation efforts.
