India's renewable energy storage capacity may surge to 6 GW by FY 2028: Crisil

India's renewable energy storage capacity will likely surge to 6 GW by fiscal 2028 from less than 1 GW operational as of March 2024, driven by ongoing implementation of several projects and expected healthy pace of auctions, Crisil Ratings said in a statement Aug. 14.

"Storage is becoming crucial with the rising share of RE [renewable energy] — both solar and wind — in the overall power generation mix," said Crisil, part of S&P Global Commodity Insights.

Given the profile of generation from renewable energy, the Indian government is working on developing the infrastructure needed through standalone storage systems like pumped hydro or battery storage systems, and storage-linked projects that combine RE generation with storage, Crisil said.

The auctions of storage projects have been ramped up, with about 3 GW of standalone storage and about 10 GW of storage-linked projects, with around 2 GW of storage, being auctioned in the past two fiscal years.

This has resulted in a healthy pipeline of 6 GW of storage as of May 2024, Crisil said, adding that development of at least this much storage capacity would be required to sustainably increase the proportion of RE power to 20%-22% in the overall power generation, as per government estimates.

Slow progress

"However, progress on implementation has been tardy," said Manish Gupta, Senior Director, Crisil Ratings.

"Slow adoption by state distribution companies [discoms] has been a key deterrent to implementation — 60%- 65% of such projects had not got their power purchase agreements [PPAs] executed until May 2024," Gupta said.

Higher tariff of Rs 4.3-5.5 ($0.051-$0.066) per unit associated with these projects have been a major deterrent, compared with other RE bids of Rs 2.6-3.2 per unit because of additional cost of storage, Crisil said.

"Going forward, it is expected that the government push to promote RE power and comparable tariffs of storage projects with other sources of round-the-clock power will provide a fillip to adoption," Crisil said, adding that medium-term power purchase agreements of thermal coal-fired plants were at about Rs 5 per unit in fiscal 2024.

The government aims to increase RE capacity to 450 GW by 2030 from 130 GW as of March 2024 and to promote this, Renewable Purchase Obligations (RPOs) have been stipulated for discoms.

Discoms will need to buy more RE power as it tries to increase its share of RE power from about 25% at present to 39% by fiscal 2028 and as its penetration increases, storage will be essential for grid balancing, Crisil said.

Last week, London-based energy think tank Ember said that developers and independent power producers in India need to be ready to meet the challenges in the next stage of the transition by evolving their structures along with the PPA and tender landscape.

"Developers need to have a clear market price outlook and quantify the market risks to competitively price the next-generation PPAs," Ember said.