Battery costs, fast renewable energy additions crucial for India's net-zero target: report

A sharp decline in prices of battery energy storage systems, fast additions of renewable energy capacities and effective utilization of coal-fired power plants over the next few years are crucial for India to achieve its net-zero emissions target by 2070, according to a joint report by London-based think tank Ember and India-based The Energy and Resources Institute.

India's electricity demand is projected to grow by nearly 6% annually in the next decade and it is important that power system planning becomes critical, and expansion is done in a cost-effective manner, the report said Aug. 20.

Battery energy storage systems costs, excluding the cost of financing, currently stand close to Rupee 13 million [$155,192]/MWh. If this drops to around Rupee 6 million/MWh, then no new coal additions might be needed, the report said.

"Overall, the cost optimal pathway for India's power transition is highly sensitive to the rate at which battery project costs decline," the report said. "If they fall 7% annually, India's coal fleet will already see its utilization factor reducing from 68% in 2023 to 50% in 2032."

If storage costs fall faster than anticipated, any new coal planned capacity faces severe lock-in and underutilization risks, it added.

In the base case of a least-cost optimized pathway, India's solar capacity is expected to increase from 84 GW as of May 2024 to 375 GW by 2032 and to achieve this, the country will need to add around 38 GW of solar capacity annually on average from 2024 until 2032.

India is projected to add around 25 GW in financial year 2024-25, and in recent years has added between 10 GW and 14 GW annually, the report noted.

Despite being cost-effective, hydro capacity buildup is expected to increase from 47 GW as of May 2024 to only about 64 GW in 2032, mainly constrained by the current pipeline and planned capacity in India.

Phased phasedown of coal

In India, the timelines for phasing down coal generation have been unclear due to several uncertainties, especially regarding storage costs, demand growth, and the costs of solar and wind energy, the report said.

"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," said one of the lead authors of the report, Neshwin Rodrigues, Ember's India electricity policy analyst.

With about 27.6 GW of coal capacity in advanced stages of construction, expected to be operational by 2027, the total coal capacity could reach at least 240 GW, the report said, adding that an additional 54 GW in the pipeline at various stages of planning and development could potentially push it to reach around 286 GW by 2032.

Recently, the government of India also said it plans to build an additional 80 GW of coal capacity by financial year 2031-32, to meet growing demand.

One main reason for the projected increase in coal capacity is the relatively low buildup of battery energy storage systems, with only 44 GWh planned by 2032, which is 192 GWh lower than the country's National Electricity Plan target, the report said.

"As solar generation grows, coal-based plants must adapt to flexible operation modes, often requiring costly modifications," the report said. "The effective utilization of existing coal plants and improvements in their flexibility are essential."

Without significant investments in storage, the growth of solar beyond 25% share in the energy mix will be limited, the report said, adding that adequate storage is needed to manage demand during non-solar hours and support a more extensive renewable energy share.