IANS | 02 May, 2024
The sharp decline in battery costs is expected to boost the share of
generation from the renewable energy (RE) capacity, including large
hydro, to 40 per cent of the all-India electricity generation by FY2030
from less than 25 per cent currently, driven by the large capacity
addition under way, credit rating agency ICRA said on Thursday.
Battery
prices reached an all-time low in 2023 led by the moderation in raw
material prices amid the increase in production across the value chain,
the agency said in a report.
Achieving such a high renewable
energy share would require development of energy storage systems (ESS)
to manage the intermittency associated with wind and solar power. The
ESS is currently mainly driven by the battery energy storage systems
(BESS) and pumped hydro storage projects (PSP). The recent appreciable
decline in battery costs is expected to speed up the adoption of BESS
projects, it said.
The ESS also plays a role in improving grid
stability, providing ancillary support services and peak load shifting.
After the notification of the bidding guidelines by the Ministry of
Power for BESS projects, there have been multiple bids called by Central
nodal agencies and state distribution utilities. The tariff under these
bids is fixed and payable based on the availability and round trip
efficiency.
Commenting on the bidding trends, Girishkumar Kadam,
Group Head - Corporate Ratings, ICRA, said, "The discovered tariff under
the BESS tenders more than halved from Rs. 10.84 lakh/MW/month in the
first Solar Energy Corporation of India (SECI) tender in August 2022 to
Rs. 4.49 lakh/MW/month in the latest tender by Gujarat in March 2024,
reflecting the decline in battery prices and improving competitiveness
of such projects."
The viability of these projects remains pegged
to the capital cost of BESS. Based on the average battery cost of
$140/kwh seen in 2023 along with associated taxes/duties and cost of the
balance of plant, the capital cost is expected to be in the range of
$220-230/kwh, he added.
The decline in battery costs over the past
decade leading up to 2021 helped reduce the cost of energy storage and
adoption of BESS projects globally. While the prices went up in 2022,
they declined in 2023 to an all-time low, led by the moderation in raw
material prices, amid the increase in production across the value chain.
Cheaper battery prices are the key to increased adoption of BESS
projects, in ICRA's view.
Kadam said, "Based on prevailing battery
costs, the storage cost using BESS is estimated to have come down from
over Rs 8.0- 9.0 per unit seen in 2022 to Rs 6.0-7.0 per unit at
present. A sustained reduction in battery prices and the relatively low
gestation period for these projects are expected to support their
greater adoption for energy storage, going forward."
