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Last Updated:  05 Sept 2023

The Ministry of Power has unveiled an extensive plan to reshape the country’s energy sector, with a specific focus on strengthening energy storage systems (ESS). This blueprint includes a range of measures, from financial incentives to regulatory changes, designed to promote the development of ESS.

One of the key proposals in this framework is the introduction of Viability Gap Funding (VGF) support for Battery Energy Storage Systems (BESS) projects. If approved, this funding could potentially cover up to 40% of the initial capital costs, as long as projects are completed within 18 to 24 months. The main objective is to ensure that the Levelized Cost of Storage (LCOS) remains competitive, making BESS a viable and cost-effective solution for managing peak power demands.

This visionary plan also extends its support to remote and underserved areas by including pumped storage projects. These projects, in addition to their energy storage function, will play a crucial role in promoting infrastructure development, potentially expanding transmission infrastructure to remote areas.

To drive sustainable growth in the ESS industry, green finance mechanisms will play a significant role. Sovereign Green Bonds, integrated into broader government financial initiatives, will become a critical source of funding for eco-friendly infrastructure and emissions reduction projects. Leading financial institutions, including the Power Finance Corporation, REC, and the Indian Renewable Energy Development Agency, will provide extended, long-term loans to support ESS initiatives.

The framework also introduces a transformation in resource adequacy planning by integrating ESS. The Central Electricity Authority (CEA) will introduce a Long-term National Resource Adequacy Plan, projecting the country’s storage needs for the next decade. Simultaneously, distribution companies (DISCOMS) will be responsible for creating a Long-term Resource Adequacy Plan covering a ten-year horizon. This coordinated approach aims to provide clarity on future ESS demand and ensure seamless integration into round-the-clock power supply requirements. To expedite the development of financially viable and environmentally sustainable ESS projects, the government will release technology-agnostic bidding guidelines for long-term energy storage, short-term energy storage, and ancillary services. These guidelines offer flexibility, allowing for composite tariffs or tariffs per MWh for storage capacity, depending on power source arrangements.

In a significant push for renewable energy integration, large-scale renewable projects exceeding 5 MW will be required to include Energy Storage Systems (ESS) with a minimum storage duration of 1 hour. Moreover, ESS developers are preparing to introduce a wide range of market-based energy and power products, including spot energy markets, capacity enhancement through energy arbitrage, and provision of ancillary services to the grid.

To incentivize ESS adoption, the framework suggests waiving electricity duty and cross-subsidy surcharges on input power used for charging ESS. States are also encouraged to waive stamp duty and registration fees for land allocated for ESS installations.

To promote domestic manufacturing, the government may establish a production-linked incentive (PLI) program specifically for BESS in the power sector. This aligns with Union Power Minister R.K. Singh’s proposal in June for a PLI program for grid-scale storage.

To ensure the quality and standards of BESS in power sector applications, the government is considering the creation of an Approved List of Models and Manufacturers (ALMM) for BESS, similar to the one issued by the Ministry of New and Renewable Energy (MNRE) for solar modules. Additionally, a nodal agency will oversee research and development efforts, fostering innovation and collaboration in the sector. An online platform will facilitate knowledge exchange, reducing redundancy in R&D initiatives.

Specialized waste management facilities will also be established to address electronic waste concerns. A structured mechanism, complete with predefined criteria and essential standards, will be put in place to facilitate the repurposing of ESS components. Abandoned mines, excluding those designated for ash back-filling, may be repurposed as hydro storage facilities, further accelerating the deployment of pumped storage projects.

This comprehensive framework underscores India’s unwavering commitment to achieving a sustainable, affordable, and secure energy future. By encouraging innovation, streamlining regulations, and attracting investments, the Ministry of Power aims to position India as a global leader in energy storage technology, with positive implications for both the environment and its citizens.

Source: https://powermin.gov.in/sites/default/files/National_Framework_for_promoting_Energy_Storage_Systems_August_2023.pdf