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Uberization of energy storage: a potential solution to India’s grid integration challenges
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ndia is currently the 4th largest electricity market in the world. The growth in overall electricity demand in the next two decades is expected to be double that of the overall energy demand. However, there are supply and demand side considerations that challenge the prime objective of a stable electricity grid – matching demand with generation at all points of time.
Coupled with other factors like adoption of gross metering rules and increasing electricity intensity of C&I customers, various strategic and operational challenges emerge for players across the value chain: generators, TRANSCOs, DISCOMs and consumers alike. Energy Storage Systems (ESS) hold promise to effectively solve most of the problems through the various value stacks offered by ESS technologies: frequency control, resource adequacy, energy arbitrage, spin / non-spin capacity and T&D capacity augmentation deferral. The applicability of the value stream depends on the location of the ESS in the value chain and the customer segment served. The value streams have varying levels of attractiveness. The total value creation also varies by the customer segment.
Preliminary assessments reveal that renewable IPPs and C&I customers are the most attractive customer segments. The demand from renewable IPPs is being driven primarily through structured RE tenders issued by SECI for solar power with advanced requirements like round-the-clock power and peak power. Due to rapidly falling battery costs, the LCOE of rooftop solar + storage projects are already comparable to retail electricity prices for C&I customers in major industrialised stated like Maharashtra, Tamil Nadu and Gujarat. Adoption of gross metering rules and subsequent reduced realization on the excess electricity transferred to the grid is expected to make the
Suman Jagdev, Director & Lead – Strategy Consulting GCA Corporation, Mumbai. case for ESS stronger – prosumers can store the excess electricity produced and use it during peak hours thus avoiding time-of-the-day charges. Electricity intensive sectors like data-centres are also looking to decarbonize their consumption through adoption of ESS. Similarly, establishment of short-term markets like Green Term Ahead Market (GTAM) and Real Time Market (RTM) is expected to boost the demand for ESS from both the customer segments as a platform to take advantage of energy arbitrage. Though initial investments are being mobilised in setting up ESS projects, customers by and large are still hesitant to commit capital investments. In such a scenario it presents an opportunity for existing and aspiring ESS companies to disrupt the market through innovative business models. The traditional asset based model involves setting up an ESS project for a particular customer. This leads to a longer payback period because of limited applicability of value streams and limited instances of application for a particular customer. On the other hand, a service led model that uses a tech-enabled aggregated ESS platform provides on-demand services to various customer segments in return for a pre-determined tariff. The aggregation model ensures higher asset utilization and cost recovery for the ESS company. In the aggregator model, the weighted average capital cost of the total system reduces as incremental storage capacities are added at lower costs (due to fall in technology cost). This results in reduction in tariffs for the customers, thus creating a win-win for both the ESS company and its customers. While the initial focus in India appears to be on the asset – led model, we expect the service-led model to gain traction as the market matures, similar to developed markets such as US and Australia. However, a suitable regulatory framework is necessary to provide adequate certainty to players in this industry and enable development of a market for ancillary services like frequency and voltage control. The DISCOMs have a history of poor cost recovery. Also, the tariff structure is skewed towards variable charges which make recovery of fixed investments on ESS difficult. Provisions pertaining to recovery of investments on ESS by DISCOMs would be needed to enable market creation. Regulatory provisions that incentivise the installation of ESS through clearly defined norms on power quality would also help in market creation. For example: The US Federal Electricity Regulatory Commission allows a separate tariff structure favoring fast acting resources like battery storage over traditional thermal power plants for frequency control. This has helped in mobilizing investments in ESS by TRANSCOs and DISCOMs. We believe that a close understanding of customer needs, identification of relevant value streams and a supportive regulatory framework will enable players to develop bespoke business models in India. Learnings from the regulatory framework and business models in international markets can also serve as a useful reference point for stakeholders. MA RC H 20 21
SAUR ENERGY INTERNATIONAL
S AUR E N E R GY. C O M
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