The End Consumers have to install storage in India, thanks to no storage policy..

Lowest tariff in India, just USD0.05/kWh

Last month I was in Bhopal for a social function with Head of RSS, Mr Mohanji Bhagwat and Chief Minister of Madhya Pradesh, Mr Shivarajji Chauhan. Before we could get down from the stage, our friend Dr Vivek Gujar gave me a news of Rewa Solar Park winning bid, it was just INR3.3/kWh for 750MW. The tariff of just USD0.05/kWh in a place where DNI is lower during months of December and January compared to Southern India.

Why did Indian IPPs bid so low?

Since there were various reasons for a such a low tariff, it can be summarized as below:

1.     The payment security mechanism of SECI that was approved by Indian Central Bank (RBI) just before the bidding. The said mechanism enhanced credibility of SECI at par with NTPC despite its weaker cash flows.

2.     This lead to Indian banks as well as multilateral institutions like Internal Finance Corporation (IFC) extending loans to IPPs for SECI’s solar parks. Hence such a solar PPA became the most sought after in India where new interest rates are the raw material for renewable energy projects.

3.     It lead to the participation of Indian conglomerates like Mahindra and Mahindra with strong balance sheet. These were the points from financial side but technical advances were even better.

4.     The first and foremost issue of curtailment was removed with deemed generation status. Per the PPA, the end consumers will have to pay even if power is not transmitted to them.

5.     In addition, the 31% fall in module prices lead to the tariff touching all-time low. The winning IPP gets 13 months to complete the project so they may enjoy further fall in module price.

The power purchaser needs to pay during the curtailment hours

The end consumer must pay the tariff even if power doesn’t reach his destination during the curtailment hours. Hence the responsibility of transmission utility is loaded on the end consumer, this is difficult to justify but it is done in India. Globally it is done by the system operator because they use it during all 24*7 operations, multiple cycles a day helps the system operator to reduce the Levelized Cost of Storage (LCOS). If they (system operators) use storage like pumped storage or flow batteries with 3 cycles a day, the LCOS could be as low as USD0.07/kWh. Storage needs to be installed at generation sites as solar curtailment is on the rise. The question is who should install it.

Here, should the power purchaser install storage?

Now power purchaser must install storage capacity at the solar plant so that energy is stored during the grid unavailability and transmitted later. It needs to make economic sense for the end sense for the end user. Here we can consider a transport utility like Delhi Metro Rail Corporation (DMRC) pays USD0.12/kWh during the day and the solar park power comes at only USD0.05/kWh, it makes sense for the DMRC to install storage at the project site provided its (LCOS) is not more than USD0.07/kWh.

Which can provide such a cheap storage?  

Battery technology may not be able to do it until all inclusive cost falls to USD250/kWh for a single cycle a day or USD500/kWh with 2-3 cycles a day. Thus, only flow battery technology could meet the requirement as these batteries can be used even 3 times a day. But flow batteries are just like the pumped hydro storage, it takes them hours to charge and then same time to discharge. We can charge and discharge flow batteries only 1.5 times during 8am to 6pm (solar day) defined by the regulations. Thus, use of Lithium or Flow Battery technology is ruled out unless DMRC pays a commercial tariff of USD0.2/kWh as is the case in the Mumbai in state of Maharashtra.    

Why India is slower to adopt storage?

The Power Grid Corporation is toying with storage pilot projects in India but its cost of implementation is stopping it from going ahead with the larger projects. The NHPC, the largest hydro power utility in India doesn’t have enough pumped hydro capacity. The distance among hydro projects is so high that its installation cost is 3 times the battery storage, hence not feasible. The most important factor, there is no statute or economic incentive for installing storage today.

What will happen without storage in India?

The installed capacity of variable clean energy may rise to 55GW (solar 22GW and wind 33GW) by March 2018. The ramp of solar power is beyond imagination in India as within 30-45 minutes 22GW of solar power comes into generation. The transmission utilities will not be able to absorb this ramp and major interstate sub-stations may go out of operations for few hours. Such a forced black-outs during the day will be common all across India and Power Grid Corporation will struggle to meet its 99% availability for its interstate transmission network.

To conclude India needs a right policy for storage and requirements of that policy may be discussed in the next article…