Why storage is the next big thing for the power sector

From the outside, Tata Power Delhi Distribution’s office in Rohini looks like a part of any other electrical substation in the country. High-voltage cables and wires criss-cross each other above the premises. A narrow path demarcates the grounds into two parts. Different types of transformers, circuit breakers, and other installations make up one side. On the other is a nondescript grey single-storey building that stretches across nearly 600 square metres. The whole complex is protected by an eight-foot-high boundary wall.

One of four chambers in the building is a battery room which at 400 square metres is the largest. It is packed with 124 racks of batteries and inverters stacked one on top of the other with a communication system on one side. The other side of the room contains four low-voltage switchgear of 420 volts of alternating current each. But this isn’t just some local electricity substation: What the room actually holds is the components of South Asia’s biggest battery-based energy storage system. What exactly can it do? It can discharge 10 megawatts (MW) of electricity in just milliseconds, enough to power nearly 6,000-7,000 households for an hour in case of a power failure.

The project—a collaboration between Tata Power, global clean energy company AES Corporation, and Mitsubishi Corporation—is India’s first grid-scale battery-based system which can store energy produced by both fossil fuels and renewable energy. The technology, called Advancion, which drives the project has been provided by Fluence, a joint venture between Germany-based Siemens and U.S.-based AES Corporation. The alliance came into being when the two decided to leverage each other’s strengths to achieve their goal of “creating a more sustainable future by transforming the way we power our world”, says Fluence Energy’s mission statement. This would be achieved by synergising Siemens’ expertise in manufacturing quick-response, short-duration storage batteries (of 30 minutes) for commercial and industrial uses with that of AES in building higher-capacity and longer-period batteries that can last for hours.

India is no stranger to power outages. As the country turns to alternative sources of energy to meet increasing demand from households and industry, the Tata Power project could be a game changer. In case of a shortfall in power in the grid—the network that gets power from producers and then releases it to the consumers—the storage batteries come to life. Stored direct current power in the batteries is converted into alternating current by an inverter and then ramped up to 11 kilowatt per hour (kWh) through a step-up transformer. The main switchgear cranks up the output to 66 kWh to make it grid-compliant. All this happens in milliseconds, which ensures that Tata Power Delhi can provide uninterrupted and quality power to all its customers, when other energy sources are not available.

Storage could be the next frontier in the power sector in a country where hardships from power outages are not a distant memory. In 2012, excess drawing of power by some states and weak interregional power transmission corridors caused back-to-back blackouts in India on July 30 and July 31. The first one was in nine states including the capital when the northern grid collapsed, affecting 300 million people. Power supply resumed after 15 hours. A bigger blackout followed the next day. This time 700 million people in 20 states were affected. There was total chaos on those two days: Hospital services were disrupted, commuters were stranded as train services were shut down, and inoperative traffic lights led to blocked roads.

Battery storage can change all that. It ensures that the company’s engineers no longer have to worry about the continuous imbalance between power generation and consumption when millions of devices are turned “on” and “off” night and day. An imbalance in demand and supply can lead to sudden spikes or falls in grid frequency, causing irreparable damage to sensitive equipment in households or even industries. Long-term and large-scale fluctuations can destabilise the grid too, which could result in grid collapse.

Sudden dips or surges in grid frequency— sudden changes in the flow of electricity between two points—are a major pain point for distribution companies (discoms) such as Tata Power Delhi Distribution (a public-private partnership between Tata Power and the government of NCT of Delhi) because of the “deviation settlement mechanism”, or penalty payment for deviating from the power withdrawal schedule. For the grid to function smoothly it needs to function at 66 kWh; anything higher or lower can destabilise the grid. Fines can run into crores of rupees. However, the benefits of the battery storage system go far beyond being just a back-up service to bridge the demand-supply gap in the grid, contends 47-year-old Rupam Raja, market director for India and South Asia at Fluence, a company with 83 projects totalling over 800 MW in 18 countries. John Zahurancik, chief operating officer of Fluence, points out that while Indians are familiar with energy storage from a home-based battery system, they are new to storage on a network level and on an electricity system level. “That was partly the reason why we worked with AES and Mitsubishi and Tata on this system in Delhi. It would give the system and network operators familiarity with how storage reduces their costs, improves their reliability, and helps them incorporate renewables,” explains Zahurancik.

For India, renewable energy holds the key to meeting its carbon emissions target made at the Paris Agreement on Climate Change in 2016. It needs to reduce its carbon footprint by a third in 2030 and ensure that 40% of its electricity comes from non-fossil fuel-based sources. “That can only be made possible if there is a much higher energy off-take of renewables and its integration in the grid,” says Raja. Many studies have pointed out that transportation and power generation account for about 40% of global greenhouse gas emissions.

As part of its efforts to cut emissions, India is looking to install 175 gigawatts (GW) of renewable energy capacity by the year 2022. A big problem with renewable energy like solar and wind is intermittency or variability of energy output from these sources. Unlike energy produced from coal whose steady supply to power generation plants means steady output, variance in the amount of sunshine or wind speed can disrupt the output. Dan Steingart, Stanley-Thompson associate professor of chemical metallurgy at Columbia University, says while ambitious targets are a good start, “innovation in energy or specifically in batteries” is important. Zahurancik says renewable storage will play a far more important role in the future as the government starts putting more and more restrictions on thermal power plants.

This is where battery storage can be of huge help. On lean days when the variance is high, excess energy that is stored can be used to make up for the fall in output and steady the flow of power to the grid. “What we are doing is converting intermittent variation prone solar and wind energy into schedulable and dispatchable power to the grid with the assistance of battery storage,’’ says Raja. Zahurancik says besides the benefit of generating power in a fraction of a second, storage facilities can be installed nearly anywhere.

“What storage does is provide very rapid power... and [it] can be put into places where it can help the power network be most reliable and cost-effective,” he adds. More importantly, with storage renewable energy can also become a primary source of power—providing power 24x7—instead of just complementing thermal power.

A key reason for the battery manufacturing industry’s success and the adoption of green energy in recent years has been the fall in prices of lithium. Nearly 92% of all storage batteries use the metal. Lithium-ion batteries are of two kinds. A smaller version is used in smartphones, electronic items, and electric cars—whose proliferation is likely to propel the market for lithium from $13 billion in 2017 to $41 billion by 2024, according to a report by energy consultancy Wood Mackenzie. Others are factory-sized, grid-level devices storing massive amounts of energy for large-scale generation, transmission, and distribution companies, as well as commercial projects, industrial plants and residential quarters. Today, many factories, industrial plants, and residential colonies are turning to distributed energy—putting up hundreds of solar panels on rooftops or setting up wind farms—not just to cut power bills but also to reduce their carbon footprint and do their bit for the environment.

Between 2011 and 2019, the cost of lithiumion batteries fell by 80%. “It is expected to further go down by 8% every year for the next three years,’’ says Raja. Other items in the battery facility such as inverters and the air conditioning system can be localised to further cut costs. In a recent blog, Logan Goldie-Scot, head of energy storage at Bloomberg New Energy Finance, said the price of an average battery pack will be $94 per kWh by 2024 and $62 per kWh by 2030. In 2018, it was around $200 per kWh. Grid-level batteries can also solve some of the country’s more complex goals.

As Rupesh Sankhe, vice president, institutional equity research, Elara Capital, points out: “Cheaper energy storage opens up opportunities to accelerate the transition to sustainable energy systems, including electric vehicles, urban power consumption, rural energy access, electricity distribution, grid integration and a complete replacement of coal power plants.” But regulators and policymakers must protect existing investment in the renewables sector while developing a framework conducive to synergies between renewables and energy storage, he adds.

The uniqueness of battery storage to which most people turn a blind eye is its versatility. “Unlike other power assets like generation, transmission, and distribution that work in silos, battery storage can benefit all these three areas in the electricity value chain,” argues Raja, who has a degree in international business from Thunderbird School of Global Management in the U.S.

Take discoms, for instance. Most of them are forced to buy additional power at higher rates to meet peak-time demand. “However, if excess power from off-peak hours is stored locally in battery storage, the same can be supplied to the consumer without the discoms having to stretch its pockets,” argues Sankhe of Elara Capital. For generation players, integrating more renewable energy at less than `3 per kWh compared to thermal at ₹4.10 per kWh to ₹5 per kWh, means discoms can provide low-cost power to consumers while keeping their margins intact. Transmission companies can save on capital expenditure by locating batteries close to peak load areas and discharging them to meet peak demand, instead of building thousands of kilometres of peak load infrastructure. “What it means is that large-scale deployment of energy storage has the potential to upend industry structures, both physical and economic, which have defined power markets for so long,” says Raja.

The challenge for storage makers is to make grid-scale storage systems viable. Developers like ReNew Power, which are building solar plants and wind farms, are unwilling to add storage to their portfolio because of cost concerns. With the levelised cost of electricity—electricity delivered on the grid from the source—becoming the benchmark for all utilities, storage is still a nascent business. “Energy storage systems are expensive and require a significant upfront investment,” says Sankhe. “Adequate fiscal incentives and suitable subsidies would pave the way for early adoption and implementation of this technology.” Globally too, the business is yet to pick up. In 2018, total storage was just enough for 6,000 MWh of electricity in the grid, according to Wood Mackenzie.

Steingart says there are challenges in India as it tries to roll out battery storage. The national grid is weak compared to the U.S. or Germany, sourcing of raw materials for lithium ion-based batteries is an issue, and there is a general reluctance to pay a premium for better quality electricity. Some think pump hydro storage, in which stored water is forced up a terrain using solar or wind energy and then released on a turbine, is a better option. The Central Electricity Authority estimates 96 GW of pump storage capacity is available at 63 sites; some 2.6 GW is already operational.

Companies and governments, says Raja, have not recognised the value and benefits of such devices: “For instance, how should you value an asset that can generate 10 MW or 100 MW of power in milliseconds when all other power sources have collapsed.” No other form of storage in India, including pump storage, can accomplish such a feat. Setting up battery storage, unlike pump hydro storage, is far easier. It does not require environment clearances and can begin operations in months and costs ₹3.5 crore-₹4 crore per MWh. The Tata Power storage plant was set up in nine months flat. “We can build 1,000 MW, four-hour batteries today,” says Raja. “Hence, ambition is the only constraint, not its potential.

This was originally published in the August 2019 issue of the magazine.