Energy Storage in India: An Overview

I. INTRODUCTION

India has pledged to expand the percentage of non-fossil fuel-based energy generation sources in its economy to 40% by 20301, along with a net zero goal by 2070.2 Keeping these targets in mind, India’s power generation mix is rapidly shifting towards renewable energy (RE) like solar and wind. However, these renewable energies are heavily dependent on weather. In addition, electricity, whether from traditional or renewable sources, must be immediately consumed, as it cannot be stored due to its nature as kinetic energy. This limitation has led to an increased focus on the development of the Energy Storage System (ESS) to store excess energy and transmit power to the energy grid during higher demand. As a result, ESS is fast emerging as an essential component of the evolving clean energy systems of the 21st century. 3

This article aims to address questions surrounding the intricacies of ESS development, reasons behind India’s strong focus on supporting ESS development, and serves as a foundational guide for individuals interested in or already engaged in the ESS ecosystem. 

II. DEVELOPMENTS IN THE ENERGY STORAGE SECTOR

The history of energy storage, shaped by technological advancements, traces back to Alessandro Volta’s invention of the battery in 1799. From basic torches to powering intricate machinery, batteries evolved, and there have been increased investments in grid-scale energy storage for integrating renewable sources of energy with storage systems to counter the dependence on weather forecasts post-2000.

The Indian government also recognised the importance of energy storage in achieving energy transition goals and has laid down various strategies and policies. In 2019, NITI Aayog released a report titled “Energy Storage System Roadmap for India for the period 2019 to 2032, 4 ” with the primary objective of estimating the ESS requirements for integration of RE into the grid, both at extra high voltage transmission grid where large solar and wind farms are connected, as well as at medium voltage and low voltage distribution grid where rooftop solar panels and other small size RE resources are connected. With the increasing penetration of renewable energy in India, ESS has the potential to disrupt the power market in this decade 5. What is more encouraging is that as of November 2023, more than 8GW of ESS tenders have been awarded in India. 6

III. ESS ECOSYSTEM

ESS is made up of batteries with chemical elements such as lithium-ion, nickel-cadmium and lead-acid that collect energy either from an electricity grid or from a solar or wind power plant. Further, an ESS comprises

a) a battery management system – which continuously monitors the state of charge of each battery cell or module to determine how much energy is available;

b) an inverter system – which is responsible for converting direct current (DC) electricity stored in batteries into alternating current (AC) electricity that can be used to power household appliances, businesses, or be fed back into the electrical grid;

c) charge controllers – which monitor the state of charge of the batteries; they ensure that the batteries are not over-discharged, which can also damage the cells and reduce battery life and

d) circuit breakers – which are designed to protect the electrical system from overloads or short circuits.

The stable functioning of the power grid depends on various factors working in tandem to strike a sound balance between electricity supply and demand. In the ESS ecosystem, services range from manufacturing the battery packs to storing and managing the frequency of electricity. The specific services offered can vary depending on the type of energy storage technology they specialise in:

a) Original Equipment Manufacturers (OEMs): OEMs manufacture the major component of the ESS, i.e. a battery (made up either of lithium-ion, zinc, or any other chemical depending upon the requirements of the project company). These batteries are purchased by another company to integrate them with a control system, power conversion system, etc. to complete the ESS ecosystem. 

b) Engineering, Procurement, and Construction (EPC): An EPC company specialises in project management, engineering, and oversees the entire development process, ensuring that the ESS is designed and constructed according to the specifications of the project company.

c) Renewable energy Integration: Integrating renewable energy sources successfully requires strategies to manage the intermittent nature of renewable energy sources and ensure a consistent power supply. 

d) Grid Support Services: Grid support services such as frequency regulation and voltage support are critical for maintaining the stability and reliability of electrical grids. The technology offered by providing grid support services company can respond rapidly to fluctuations in demand and supply by either absorbing excess energy or releasing stored energy.

e) Microgrid Support:  A microgrid is a localised energy system that can generate, store, and distribute electricity. ESS can provide voltage support to microgrids, helping maintain stable voltage levels. This is particularly important in microgrids with a high penetration of renewable energy sources.

f) Residential and Commercial Energy Storage: Residential energy storage refers to systems designed for storing excess energy generated in homes, often from sources like solar panels. Companies providing residential and commercial energy storage services allow homeowners and industries to store surplus energy and use it when needed. Residential energy storage systems typically consist of batteries that store electricity for later use, whereas commercial energy storage involves larger-scale systems designed for businesses, industries, or utility companies. These systems can store significant amounts of energy to support grid stability. 

g) Backup power and reliability: An Uninterruptible Power Supply (UPS) is a system that provides emergency power to a load when the primary power source, typically the electrical grid fails. ESS plays a crucial role in UPS by storing electrical energy and releasing it when needed to ensure a continuous and reliable power supply.

h) Electric Vehicles Charging Infrastructure: Electric Vehicles Charging Infrastructure is a network of charging stations and associated facilities that support the charging of electric vehicles. This infrastructure includes various types of charging stations, ranging from slow chargers to fast chargers and rapid chargers located in public spaces. Integrating the charging infrastructure with an ESS can support fast charging capabilities by providing additional power during peak demand periods. 

i) Operations and Maintenance (O&M): Once the ESS is operational, an O&M contractor will be looped in to oversee the day-to-day management and control of the energy storage system and offer monitoring solutions, remote diagnostics, and on-site maintenance to ensure that the system continues to operate optimally throughout its lifecycle.

IV. LEGAL LANDSCAPE

a) Recognition of Energy Storage Solutions: 

The Electricity (Amendment) Rules, 2022 7 (Rules) now recognise ESS as a part of the power system under Section 2(50) of the Electricity Act, 2005. ESS can be used independently or in conjunction with the generation, transmission, and distribution infrastructure. The independent energy storage system is a delicensed activity at par with a generating company as per Section 7 of the Electricity Act, 2005. However, if the owner or developer seeks to operate the ESS as an independent storage system, registration is required as per Rule 18, and the capacity of such ESS shall be verified by the Central Electricity Authority. The Rules also allow the developer or owner of the ESS to sell, lease or rent out the storage space of the ESS, in whole or in part, to any generation, transmission or distribution utility or any load despatch centre. 

ESS are also recognised in the CERC (Ancillary Services) Regulations, 20228.Ancillary services are services required for maintaining grid frequency, stability, and reliability, and include active power support for load following, reactive power support, etc. The CERC (Ancillary Services) Regulations, 2022 (2022 Regulations) provide mechanisms for procurement, deployment, and payment of ancillary services at the regional and national level for maintaining the grid frequency close to 50 Hz. ESS is eligible to provide Secondary Reserve Ancillary Service (SRAS) and Tertiary Reserve Ancillary Service (TRAS), which are fast response services to support grid frequency and relieve congestion. This will create an additional revenue stream for ESS service providers and will attract investments in the energy storage sector.

b) Guidelines for Procurement and Utilisation of Battery Energy Storage Systems: 

The Ministry of Power (MoP) 9 has issued guidelines to standardise and streamline the process of procuring and using Battery Energy Storage Systems (BESS) for various applications in the power sector. The guidelines discuss the use of BESS with renewable energy projects, use with the generation, transmission and distribution of electricity, and standalone BESS engaging in arbitrage operations among others. It provides for the bidding eligibility and process to be complied with by the procurer of energy from BESS. Appendix 2 of the guidelines also provides a comprehensive list of technical parameters. The list includes codes, standards and general specifications for labelling of batteries, electrical safety, and quality to ensure expected service life and weather resistance, which are required to be complied with by a BESS developer. For example, lead acid or nickel-cadmium batteries will have to conform to standard IEC 62485-2, and lithium-ion batteries will have to conform to standard IEC 62281 if used in the BESS. International Electrotechnical Commission (IEC) is an international commission charged with the preparation and publication of international standards for all electrical, electronic, and related technologies. As per the guidelines, the BESS Developer shall also ensure disposal of the battery used in the project as per the E-waste (Management and Handling) Rules, 2022 10 and the Battery Waste Management Rules, 2022 11.

c) Battery Waste Management Rules, 2022:

Battery Waste Management Rules, 2022 (2022 Rules) are applicable to any producer, dealer, other entity, or consumer who is involved in the collection, transportation, segregation, or any other process involved in the management of waste batteries. The 2022 Rules provide targets for different types of stakeholders, for e.g., the recyclers must mandatorily recover a minimum of 90% of recoverable materials from portable and EV batteries and 60% from automotive and industrial batteries by 2027. Additionally, the 2022 Rules also outline labelling specifications to make consumers aware of the recycling mechanism. As per the Extended Producers Responsibility (EPR), the producers must apply for approval, including information about the weight, quantity, and other characteristics of the batteries, via the CPCB online portal and meet their EPR obligations using the buyback policy, deposit refund schemes, or any other model. Schedule II of the 2022 Rules lays down EPR targets for the producer that are specific to the kind of battery (viz. Lead acid, Lithium-Ion, Nickel Cadmium, zinc-based battery, etc.) produced by them. For example, portable and EV Battery producers are required to have 5% recycled content in new batteries by 2027, increasing to 20% by 2030-2031. Additionally, automotive, and industrial batteries are required to have 35% recycled content in new batteries by 2025, increasing to 40% by 2027-2028. Stakeholders who violate the EPR norms will be liable to pay environmental compensation, which will be decided by the CPCB or State Pollution Control Board. 

d) Incentives at the Central level: 

  • Viability Gap Funding for BESS: In August 2023, the National Framework for Promoting Energy Storage Systems suggested that the first few BESS projects will be eligible for Viability Gap Funding (VGF) to lower the Levelised Cost of Storage (LCoS). Subject to the requirement that the projects be put into service within 18 to 24 months, the VGF will be up to 40% of the project’s capital cost.12 

    In September 2023, the Union cabinet approved the Scheme for Viability Gap Funding for the development of Battery Energy Storage Systems (Scheme) 13 having an initial outlay of INR 9,400 crore including a budgetary grant of INR 3,700 crore. The Scheme aims to achieve an LCoS of between INR 5.50 and INR 6.60 per kilowatt-hour (kWh) to make stored renewable energy a practical solution for controlling peak electricity demand throughout India. Distribution Companies (Discoms) shall be granted access to a minimum of 85% of the BESS project capacity to guarantee that the Scheme’s benefits are realised to the consumers. The VGF will be distributed in five instalments corresponding to the different phases of the BESS project. Further, a transparent and competitive bidding process will be used to choose BESS developers for VGF grants, ensuring fair competition for both public and private sector organisations.
  • Waiver of Interstate Transmission Charges: The MoP, by an order dated 23 November 2021 14, allowed for waiver of Inter-State Transmission Systems (ISTS) charges. The waiver of ISTS charges applies to ESS projects that are commissioned up to 30 June 2025. ESS projects that are commissioned after 30 June 2025 will have to pay transmission charges for using the ISTS network, which will increase by 25% annually from 01 July 2025 till 30 June 2028. The waiver shall be applicable for 12 years for BESS or a period subsequently notified for future projects from the date of commissioning of the BESS project.
  • National Programme on Advanced Chemistry Cell (ACC) Battery Storage 15 :Investments in manufacturing and overall value addition for ACCs are still negligible in India. Due to this, the domestic demand for ACCs is catered by imports. Therefore, to boost the domestic manufacturing of ACCs, the government formulated this production-linked scheme or the ‘National Programme on Advanced Chemistry Cell (ACC) Battery Storage’.

This scheme aims to achieve an ACC manufacturing capacity of 50 GWh for ACCs and an additional cumulative capacity of 5 GWh for Niche ACC Technologies (technologies with a minimum threshold capacity of 500 MWh). Under this scheme, the beneficiary firm will have to commit to setting up a minimum of five (5) GWh of ACCs manufacturing facility, and the total annual cash subsidy to be disbursed by the Government will be capped at 20 GWh per beneficiary firm. The manufacturing facility would have to be commissioned within two years and the subsidy will be disbursed thereafter over a period of 5 years. The eligibility criteria to apply for the scheme will be laid out in the Request for Proposal (RfP) and the allocation to beneficiary firms be done by submitting a technical bid and a financial bid. It should be noted that the amount of cash subsidy to be distributed to the beneficiary firm shall be disbursed quarterly and that the total incentive payout over the period of five years of the scheme will be INR 18,100 crores. 

This scheme will not only reduce India’s import dependence but also facilitate demand for EVs. As India pursues an ambitious renewable energy agenda, this scheme will be a key contributing factor to reduce GHG emissions, which will be in line with India’s commitment to reach net zero by 2070.

e) Incentives at a State level:

While there are guidelines, technical standards, and schemes applicable to ESS on a central level, various states have extended incentives to ESS under their respective renewable energy/solar policies. Listed below are a few of them: 

i) States like Madhya Pradesh16 and Odisha 17 , under their renewable energy policy, provide various incentives to ESS projects, including exemption in electricity duty, 15% reimbursement on stamp duty on purchase of private land for the project, government land on concessional rate, etc. 

ii) Uttarakhand’s solar policy provides for 100% reimbursement of custom duty on components required for developing ESS for a period of 5 years.18  

iii) Jharkhand’s solar policy provides for 100% exemption from transmission and wheeling charges for a period of 10 years from the date of commissioning of the project for grid-connected solar power projects with storage systems selling power within the state.19  

These state policies will be helpful in providing affordable, reliable, and clean energy, especially to the rural communities that are not connected to the grid or are prone to grid disruptions/natural disasters. 

The energy landscape varies across states, necessitating policies aligned with local resources, energy demand, and socio-economic conditions. This suggests that states could consider formulating specific ESS policies or extending existing incentives from their renewable energy/solar policies to support ESS growth.

V. CHALLENGES AND WAY FORWARD

India has been making strides in improving grid stability and addressing energy demand-supply challenges. However, there are several challenges that India faces in adopting and implementing ESS:

a) Lack of sufficient raw materials: The essential components needed to create batteries, such as lithium, copper, cobalt, and nickel, are in short supply in India. Though a substantial lithium reserve, estimated to be 5.9 million tonnes 20 , was found by the Geological Survey of India in Jammu and Kashmir in February 2023, the auction of this lithium reserve will probably include a requirement that locally obtained lithium can be refined only in India. India does not currently have a functioning facility for refining lithium and would have to meet its lithium demands either by importing lithium or recycling the used batteries.

b) Policy and Regulatory Framework: Developing and refining policies and regulations that support the integration of energy storage into the existing power infrastructure is crucial. A robust policy comprising of tax subsidies, R&D and innovation support, long-term targets, and milestones, etc. is needed to encourage investments in this sector.

c) Harmful chemicals: The electrolytes in some batteries may be harmful to the environment or people. Battery smoke that is unintentionally produced can also pose a significant risk to life and health.

d) Huge costs: The main barrier to the adoption of ESS by industrial, commercial, and residential customers is the high cost of the batteries. Additionally, storing energy is expensive too. In fact, when the cost of an ESS is added to the cost of solar panels or wind turbines, solar and wind power are no longer competitive with coal or natural gas. 

e) Land Availability : The physical footprint of large-scale battery storage facilities may require significant land, and finding suitable locations that balance environmental and logistical considerations can be a challenge.

The future of ESS in India is poised for significant growth, driven by the nation’s emphasis on integrating renewable energy sources into its power grid. Government initiatives, such as the National Programme on Advanced Chemistry Cell (ACC) Battery Storage and Guidelines for Procurement and Utilization of Battery Energy Storage Systems aim to promote the manufacturing and adoption of advanced energy storage solutions. Additionally, advancements in battery technology, both in terms of efficiency and cost reduction, are expected to further accelerate the widespread deployment of ESS in India. In conclusion, the future of ESS in India is contingent upon a holistic strategy that intertwines workforce development, educational partnerships, research, sound legal policies, and grid modernisation efforts. By prioritising these initiatives, India can not only harness the full potential of ESS but also foster a resilient and sustainable energy landscape.


[1] https://www.ceew.in/sites/default/files/Green-Jobs-Report-Jan27.pdf

[2]https://www.bbc.com/news/world-asia-india-59125143

[3]https://www.niti.gov.in/sites/default/files/2019-10/ISGF-Report-on-Energy-Storage-System-%28ESS%29-Roadmap-for-India-2019-2032.pdf

[4] https://www.niti.gov.in/sites/default/files/2019-10/ISGF-Report-on-Energy-Storage-System-%28ESS%29-Roadmap-for-India-2019-2032.pdf

[5] https://ieefa.org/sites/default/files/2023-12/Energy%20Storage_Dec23.pdf

[6] https://www.pv-magazine-india.com/2023/12/21/india-has-awarded-more-than-8-gw-of-utility-scale-energy-storage-in-tenders-as-of-november/

[7]https://powermin.gov.in/sites/default/files/Electricity_Amendment_Rules_2022.pdf

[8]https://cercind.gov.in/Regulations/Ancillary-Service-Regulations-2022.pdf

[9]https://powermin.gov.in/sites/default/files/BESS.pdf

[10]https://cpcb.nic.in/uploads/Projects/E-Waste/e-waste_rules_2022.pdf

[11]https://cpcb.nic.in/uploads/hwmd/Battery-WasteManagementRules-2022.pdf

[12]https://cdnbbsr.s3waas.gov.in/s3716e1b8c6cd17b771da77391355749f3/uploads/2023/09/202309051208486334.pdf

[13]https://pib.gov.in/PressReleasePage.aspx?PRID=1955112

[14]https://img.saurenergy.com/2021/11/waiver_of_ists_charge_compressed.pdf

[15]https://cdnbbsr.s3waas.gov.in/s3716e1b8c6cd17b771da77391355749f3/uploads/2023/08/202308282004453533.pdf

[16] http://rumsl.mp.gov.in/wp-content/uploads/government_policy/2022/08/English-Policy.pdf 

[17] https://energy.odisha.gov.in/sites/default/files/2022-12/3354-Energy%20dept._1.pdf

[18] https://ureda.uk.gov.in/department2/library_file/file-08-05-2023-13-00-55.pdf

[19] https://api.jreda.com/all-uploaded-img/img/6360e972de5e0.pdf

[20] https://www.thehindu.com/news/national/india-to-auction-lithium-reserves-found-in-jammu-and-kashmir-by-december-mines-secretary/article66802920.ece