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Cover Story | August 2017

Storing the Sun

With increase in share of renewables in the distribution system, it has become indispensable to incorporate large scale integration of energy storage, which gives flexibility to quickly ramp up supply in case the need arises.

India has been witnessing an increasing trend in share of renewable power installed capacity over the last few years. Globally, the country is the fastest growing electricity sector, and at the end of FY16-17, it crossed 12.2 GW of cumulative solar installations. However, to achieve the overall 100 GW of solar target; grid stability, solar ramping and smoothing of output will be major challenges.

Additionally, solar generation is inherently intermittent and supply may create very large instantaneous ramps. It is also to be noted that operating hours for solar plants are limited to the daytime, when the load is low for consumers.

According to Debi Prasad Dash, Director - India Energy Storage Alliance (IESA), Customised Energy Solutions, 'for islands like Andaman, which are currently dependent on diesel generators as primary source of electricity, and with GoI making plans to add 100 MW solar, power balancing and solar variability are also issues to consider.'

Thus, apart from grid connected large scale solar, solar installed in off-grid and micro-grid systems will also require energy storage as an essential part of the full system.

Growth
Traditionally, energy storage has been limited to off-grid solar. In the past couple of years, the country has witnessed a trend towards combining solar with grid interactive solar and other renewable sources, aided by a proactive government approach and innovations by private players.

A 2014 market study conducted by IESA estimated a 15-20 GW market potential for energy storage by 2020. In its recent update, which 'takes into consideration current opportunities as well as a detailed overview of various growth scenarios and key government initiatives', the IESA has revised the figure to over 70 GW by 2022. Given the technology and infrastructure explosion in India, the country's renewable energy segment is witnessing a new paradigm. States Mudit Garg, Director, Operations, Vivaan Solar, 'We have experienced almost 25 per cent growth in the energy storage segment.'

Adds Hartek Singh, Chairman and Managing Director, Hartek Group, 'The energy storage segment has been growing consistently, and are particularly useful when it comes to stocking up renewable energy. Backup inverters make up for over 60 per cent of India's energy storage market.'

To this Kunwer Sachdev, Managing Director, Su-Kam feels, 'The interest for solar is admirable. Consequently, producers should concentrate on the business and private divisions and ensure that the last mile funnels are not stifled for power. They should undertaken activities to drive control utilisation in these vast client base.'

Further, driving the expansion for rural utilisation - through rural electrification projects that involve providing power packs and solar lanterns will also be a key driver giving a boost to the energy storage market.

Investment & risks
Solar parks mean high investments and long payback periods. But, solar prices have dropped by more than 80 per cent in the last 10 years. A similar drop can be expected in energy storage feels Singh, 'As more and more capacity building projects are set up, payback periods will also come down. Solar storage will see a consistent drop in prices in proportion with the increase in project volumes, thus resulting in access to inexpensive capital and thereby making way for a higher risk taking capacity.'

In fact, according to their report for global M&A activity for the battery storage sector for the second quarter and first half of 2017, consulting firm Mercom Capital Group found that Venture Capital (VC) funding (including private equity and corporate venture capital) for battery storage companies jumped in Q2 2017 to $422 million in 10 deals compared to $58 million in eight deals in Q1 2017 due to very large funding deal. Year-over-year (YoY) funding was also higher compared to $125 million raised in Q2 2016 from 10 deals. In the first half (1H) of 2017, $480 million was raised in 18 deals compared to the $179 raised in 20 deals in 1H 2016.

Further, 11 investors participated in battery storage funding in Q2 2017 with lithium-based battery companies raising the most. There were seven debt and public market financing deals in battery storage in Q2 2017 totalling $107 million compared to $22 million in two deals in Q1 2017. In 1H 2017, there was $129 million raised in nine deals compared to three deals bringing in $69 million in 1H 2016.

There was one battery storage project fund in 1H 2017 for $152 million compared to three deals raising $195 million in 1H 2016. Battery storage project funding in 1H 2017 totalled $5 million in two deals compared to no deals in 1H 2016. There were three M&A transactions involving battery storage companies in Q2 2017. In Q1 2017, there was one M&A transaction. In the first half of 2017, there were four transactions (one disclosed) compared to six transactions in 1H 2016 (two disclosed).

Garg avers, 'Right now the cost of storage is really high, and battery life is not more than five-six years which increases the overall risks. But, as the demand increases and the technology is growing very fast, risks will definitely reduce in the future.'

Technology
Domestic payers in the batteries and energy storage segment have been doing well, with companies offering lead acid storage having witnessed impressive growth. Though their role is confined to assembly of imported cells, we have seen the advent of Li-ion companies in the last few years. While large-scale deployment is still missing, there is a lot of innovation in this space.

'However, since we are in the growing stage and emulating the developed countries in almost every segment, most of the technology is imported from other countries. This is the reason why the costs are higher, and returns are thin,' points out Garg.

Adds Sachdev, 'Overflowed lead-corrosive batteries have so far had greater market share, however they do not meet client requirements for extended periods with a three-five year life expectancy.'

With such applications, appeal supply criss-cross and high proprietorship expenses of diesel gensets, shoppers will feel the requirement for high power, profound release batteries more than they have done previously. Alongside these progressions, the value scope of lithium-particle batteries has descended extensively finished the most recent 12 months to change the flow of the market.

'It was not long back when Li-particle batteries cost more than $1,000/kWh. Presently a portion of the worldwide Li-particle battery producers have even revealed value focuses beneath $400/kWh for a similar innovation,' he points out.

Singh concurs, 'Lead acid will dominate the market in the short term, but eventually lithium-ion batteries will take over. Prices of lithium-ion batteries have been dropping steadily, and they will soon become more viable than lead acid batteries in coming years.'

Future Ready
Distributed solar and storage technologies possess the ability to reduce variability, strengthen grid resilience and improve energy reliability. India currently wastes substantial amounts of renewable energy - sometimes reaching about 15-20 per cent, depending on geography and time of the day.

'There are a considerable number of advantages associated with the concept of distributed storage. It is able to augment the operational levels of the power system since it eliminates the single point of power consumption or generation,' feels Atul Arya, Head - Energy Systems, Panasonic India.

The transformative role distributed energy storage will play in the future of energy, largely depends on a broad range of factors. Regulatory and economics will have an obvious impact on how the technology shapes up, however there are a large number of other characteristics such as consumer behaviour and social trend which have a telling say on the 'eventuality' of the storage technology.

Arya adds, 'Although India's energy storage business is still very much in its nascent stage, given the increasing need for storage due to PV penetration, the ball is now in the court of the Indian policy makers to capitalise on this sizeable opportunity and gain a major share in the global storage market.'

Case in point: the steep fall in solar tariffs is having unintended consequences with SECI having to cancel two tenders - both announced last year (200 MW at the Pavagada Solar Park in Karnataka and 100 MW at the Kadapa Solar Park in Andhra Pradesh, both under Phase II of JNNSM), which were to include energy storage capacity for the first time in India.

Currently solar plants in the country operate for 12 hours daily - transferring power directly to the grid, the addition of solar storage was supposed to change this trend. The storage capacity sought was around 2.5 MWh for every 50 MW installed. While an excellent solution to mitigate the irregularity of renewable power, batteries for solar storage are expensive, with costs averaging around $450/kWh. SECI had hopes that VGF provided by MNRE would be able to off-set the costs, nut while the bids were sought in Oct-Nov 2016, they never opened.

Ashwini Kumar, Managing Director, SECI expressed disappointment, 'Even with VGF, a project that includes storage can never hope to match the current tariffs. Everybody in the industry is disappointed as it was the first time we were trying this.'

However, Singh is still positive, 'Energy storage technologies will cost more with batteries attracting the highest tax of 28 per cent. But there is still a lot of ambiguity on the actual impact of GST on the solar sector. But overall, GST will have a positive impact on the solar business, though prices are expected to increase marginally in the short term.'

Regulatory policies can play a big role in ensuring growth and there is a dire need to come up with a regulatory framework and policies which encourage storage. For instance, storage should be made an essential part of the rural electrification programme.

Adds Singh, 'Connecting energy storage technologies with rural micro-grids can go a long way in promoting the storage market. Though the government has doubled the solar park target from 20 GW to 40 GW, on-ground implementation is slow with the execution limited to a handful of states.'

- JOCELYN FERNANDES

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