India Opens Market for Solar Battery Makers Such as Tesla

  • Andhra Pradesh tender to feature storage for some capacity
  • Grid stability expected to be possible bottleneck in future

India plans for the first time to include energy storage as a requirement when a solar project is tendered this month, opening what could become a significant new market to battery makers such as Tesla Motors Inc., Samsung SDI Co. and Panasonic Corp.

The state-owned Solar Energy Corp. of India, which is responsible for implementing the government’s green targets, will ask bidders to include a storage component in 100 megawatts of the 750 megawatts of solar capacity tendered in the southern state of Andhra Pradesh, Managing Director Ashvini Kumar said in an interview.

The intention of the pilot program is to reduce fluctuations in electricity supply in order to make possible the transfer of clean energy between states. India’s Prime Minister Narendra Modi has set a goal of 175 gigawatts of clean energy by 2022. The Andhra Pradesh project include 15 minutes of storage each for two solar installations.

Warehousing power is considered a crucial component of India’s green targets. The requirement, if more broadly adopted, has the potential to invigorate the storage market because of India’s outsized ambitions for the industry. It would give manufacturers the scale they need to help bring down costs of battery storage that are holding back wider adoption.

“Once renewable capacity is large enough to start becoming a major problem for the grid, storage will come in a big way,” said Anish De, a partner for infrastructure and government services at consulting firm KPMG.

Global battery makers are optimistic about the projects they can put together in India.

Tesla sees an "exciting market opportunity" that it looks to expand in 2016, the Palo Alto-based company said in its third-quarter shareholder letter last year.

Samsung SDI “is currently evaluating business opportunities for photovoltaic plus energy storage applications, along with the micro-grid projects in order to supply eco-friendly energy in remote areas,” it said in an e-mail response.

Panasonic Plan

Panasonic is preparing suitable products for India, said Hiren Pravin Shah, head of the energy business at the company’s local arm.

By 2020, about 11.3 gigawatts of energy storage will be installed globally, equivalent to less than one percent of the total installed capacity of intermittent renewables, according to data from Bloomberg New Energy Finance.

Much of the current focus on energy storage is in the U.S., Korea and Japan, said Logan Goldie-Scot, an energy storage analyst at London-based BNEF.

“Recent actions in the Indian market suggest that both the government and the private sector are eager to take advantage of recent cost reductions and performance improvements across the space,” Goldie-Scott said.

Cost Concerns

The energy storage market in Australia is forecast to double each year through 2018 as homes turn to the technology amid increasing electricity prices, according to a report last month from the industry researcher IHS Inc.

At the same time, the renewable energy industry in India is concerned that the high cost of storage would make projects too expensive to develop, tipping the balance toward fossil fuels.

The price paid for solar power in India fell to a record low of 4.34 rupees (6 cents) a kilowatt-hour in auctions held in the state of Rajasthan in January, where a total of 420 megawatts of capacity was awarded.

“It may be a good experiment but this is not the right time to push for storage in utility-scale projects as it will double the cost of clean energy," said Sunil Jain, chief executive officer of Hero Future Energies Pvt., the clean energy arm of the Hero Group.

Cost Concerns

Adding the cost of storage to the current projects would boost the price of energy from photovoltaics to 14 rupees a kilowatt-hour, according to Panasonic’s Shah. Lithium ion batteries like the ones used in Tesla’s Powerwall home storage device currently cost about four times the price of traditional lead-acid batteries, Shah said. 

“If this price comes down to 1.5 times that of lead-acid batteries, there’ll be nearly 70 percent growth in this segment,” Shah added.

Government planners say the relatively small size of the first tender won’t inflate costs excessively given that the aim is to assess how much fluctuation can be addressed.

"The cost should be absorbed within the same amount of government funding that we provide for a normal solar project, which is one of the reasons the pilot is limited to 15 minutes," the SECI’s Kumar said.

SECI is also looking to build an experimental solar-wind hybrid project with storage in Lahaul Spiti in the state of Himachal Pradesh. The project aims to have two megawatt of solar and 500 kilowatt of wind capacity with one megawatt of battery storage, he added.

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