Energy storage: What’s Driving the Growth?

Sudeshna Das is director at ComConnect Consulting

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While lack of reliable grid power was a driver for traditional energy storage systems, ambitious renewable energy goals, growth in electric vehicle sales, and need for reduction in diesel usage will boost the sales of energy storage systems throughout the country

Energy storage systems are essential for large renewable energy systems to provide a clean, resilient energy supply through local generation. The technology continues to prove its value to grid operators around the world, who must manage the variable generation of solar and wind energy.

Several studies predict a considerable near-term potential for stationary energy storage as its costs are falling. In fact, its cost could reduce to $200 per kilowatt-hour (half the current price) in 2020 and $160 per kilowatt-hour or less in 2025.

Besides, identifying the most economical projects and highest-potential customers for storage has become a priority for a diverse set of companies including power suppliers, grid operators, battery manufacturers, energy-storage integrators, and businesses having established relationships with prospective customers such as solar developers and energy-service companies. According to McKinsey, the global opportunity for storage could reach 1000GW in the next 20 years as the technology matures.

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Indian scenario

India is one of the fastest growing economies in the world. However, its annual per capita energy consumption of around 1222kWh is far below the level in other developing countries like Brazil and China. Therefore India needs a clean energy revolution in order to provide energy access to its 240 million households that still lack this basic facility.

Moreover, urban middle-class population of the country, exceeding 250 million, aspires for the same level of energy access and power quality as in developed countries through movements like Smart Cities and sustainable living.

Lack of reliable and quality power supply is a major obstacle to the development of manufacturing and industrial sector in India. Industries rely on diesel-powered generators, while households use inverters with batteries to deal with unscheduled power cuts, low voltages or variable frequency.

Given this scenario, energy storage systems can play a key role across all segments in India. India Energy Storage Alliance (IESA) estimates the Indian energy storage market to reach 16,445MW by 2020 (Fig. 1) and further up to 70GW by 2022. This huge market potential will attract huge investment.

India’s energy storage market potential by 2020
Fig. 1: India’s energy storage market potential by 2020 (Source: India Energy Storage Alliance report)

India has the potential to not only become one of the largest markets for advanced energy storage technologies but also a global hub for manufacturing various energy storage technologies due to an attractive domestic market and strengthening of business environment. With Make in India programme, the government of India aims to encourage various technology developers to set up their manufacturing base in India. Although India missed the opportunity to set up mainstream manufacturing for solar, energy storage is an upcoming industry where Indian manufacturers can play a key role in the global supply chain.

Market dynamics

India’s energy storage potential is based on the combination of energy resources, historical physical infrastructure and electricity market structure, regulatory framework, population demographics, energy-demand patterns and trends, and general grid architecture and condition. The performance of these fundamental factors creates the demand for new products and services, and energy storage is increasingly being sought to meet these emerging requirements.

The Indian energy storage providers are gearing up with large-scale pilot projects. While lack of reliable grid power was a driver for traditional energy storage systems, ambitious renewable energy goals, growth in electric vehicle sales, and need for reduction in diesel usage will boost the sales of energy storage systems throughout the country. The government of India has set up 175GW target for renewable energy deployment by 2022, and it is evident that energy storage technologies will play a key role in achieving this goal.
While specific drivers for energy storage markets vary with time, the overall market can be bucketed under three major segments:

1. Utility-scale or grid-tied applications refer to systems installed on transmission or distribution networks providing services to grid operators (Table I)

2. Off-grid applications covering behind-the-meter (BTM) systems are installed at the customer side of a utility meter and primarily help reduce costs and improve resiliency for commercial and industrial (C&I) or residential customers (Table II)

3. Remote power systems refer to storage systems operating as part of isolated electricity networks

Remote power systems are still a niche segment compared to grid-tied and off-grid applications.

Grid-tied scenario

Key applications at grid scale include provision of fast-response ancillary services such as frequency regulation, renewable ramp rate control, smoothening and firming up of renewable power as well as optimisation of transmission and distribution investments. Both policymakers and industry stakeholders are taking active steps in exploring energy storage integration in India.

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