C&I energy storage has a bright future

30 August 2019 |

Energy storage is slated to play a critical role in supporting rapid expansion of variable RE in the grid while ensuring its stability and security. While a number of grid-scale solar-storage hybrid tenders have been issued recently, activity in behind-the-meter market is yet to pick up pace in India.

The residential market, especially in tier I cities, adopted home inverter systems early on to deal with historic issues of grid power reliability. The commercial and industrial (C&I) consumers, on the other hand, have been using a mix of captive thermal and diesel generation sets for power back up. Rapid technological enhancements in batteries and fall in their prices are expected to lead to a huge opportunity for energy storage systems in this segment.

Storage has a number of other potential applications useful for C&I consumers. Combining storage with RE power generating source can help C&I consumers maximise utilisation of cheaper RE and be more self-reliant. They can also use storage to reduce demand during peak hours, when power prices are higher than normal, resulting into savings in electricity bills. Then, there are potential savings to be made by reduction in demand charges as the consumers can bring down their connected load with the help of storage. Finally, as and when the ancillary services market develops in India, storage systems can be used to create additional revenue streams by C&I consumers.

Realisation of these potential benefits by C&I consumers depends on having a conducive regulatory and policy environment. First of all, there is a need for an effective Time of Day (TOD) pricing and market for grid balancing services. While many states already have TOD pricing, the peak to off-peak price ratios are usually in the range of 1.15-1.20, which is not considered adequate incentive for consumers to shift their consumption. This is lower than in most other countries (see chart below). The ancillary services market also needs opening up as it is still very limited at present with only slow tertiary services (response time of 15-60 minutes) being utilised. CERC intends  to redesign the ancillary services mechanism in India by introducing a slew of reforms in order to move towards a market-based mechanism for procurement.

Figure: Peak to off-peak electricity tariff ratio in selected regions globally

Source: BRIDGE TO INDIA research

Note: Data is for selected utilities within each region.

The second prerequisite for C&I storage market is techno-economic improvement in battery storage technology. Average li-ion battery pack prices have reduced by around 85% from 2010 to 2018. Further reduction by 20-25% in the next three years should tilt the scale and make storage financially attractive.

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