Is solar power development sustainable?

I got an opportunity to speak at the Times Renewable Energy Expo, a Renewable Energy (RE) conference in Pune this past week. I was privileged to be part of the panel featuring Dr Chetan Singh Solanki, Prof. IIT Bombay who has pioneered the adoption of solar power in rural communities. The theme of the panel was ‘Pace of RE scale-up in India’.

I represented India Energy Storage Alliance (IESA) and spoke about integration of energy storage with RE. The intent was to emphasise the need for energy storage in providing flexibility to the grid under increasing penetration of renewable energy. Being intermittent and seasonal, wind and solar energy do have its drawbacks. In spite of being a clean source of energy, the intermittent nature stresses the traditional fossil fuel plants and forces them to operate below optimal efficiency thereby increasing the operating cost and associated emissions. The message was well received by the audience comprising of project developers, researchers, policy makers and RE enthusiasts. But, the burning topic throughout the conference was ‘Are the record low solar tariffs realistic?’

The drop in solar prices

The recent bids in Bhadla that resulted in record low tariffs of ₹ 2.62/kWh and ₹ 2.44/kWh in a span of 2 days was a major discussion point. The drop from ₹ 3.15/kWh to ₹ 2.44/kWh (23%) in a month was never expected. (Read more about why there are no more outliers in solar)

 

Module costs

The drop in solar prices is attributed to the decline in module prices which is true but it hides the bigger picture. In a recent publication by Bloomberg, an Altman Z score analysis(see below) of the module manufacturers reveals a gloomy picture. Only one company lies above the mark with three others in ‘just safe’ zone while the rest have all indications to go burst. Incidentally Solar World just announced the beginning of its end. (Also, interestingly Bloomberg lists most of these companies under Tier 1 suppliers).

Is the development sustainable?

Wind recently witnessed an intense debut reverse bidding and if the indications are right, it could well follow the solar route albeit at a lower rate. So the big question then turns out to be, ‘Is RE development sustainable?’ ‘Can companies and the stakeholders sustain this in the long run?’ I have due respect to all the experts in the big corporations who are winning projects at this price, I wouldn’t challenge their acumen. At a personal level, I just have a few points to say why I believe this development is not sustainable in the overall gambit of things.

• There is intense corporate competition, with no long term visibility and the urge to develop large portfolios in a short time is driving the bids.
• How can module manufacturers who are financially weak be trusted to produce quality product that performs for 25 years?
• Supply is just one side, on the other side low tariffs is also driving down installation costs. There is an even bigger pool of ‘installation experts’ who offer manpower services at any price asked for (What about the logic that says your pay increases as you build expertise?).
• And, the last one, preserve natural resources. I personally feel this is a huge problem, we don’t want to destroy land (and water) resources on projects whose performance is going to decline rapidly every year.

Renewable Energy development that is sustainable is the need of the hour!

What’s next for the energy storage sector in India?

The Indian electric grid is now certain to have over a 100GW of Renewable Energy (RE) even under the worst case scenario by 2022 (CEA, 2016). It would mean over 25% of the installed capacity being intermittent and hence there is a need to build flexible assets to compliment them. The enthusiastic industry participation at the Energy Storage India-2017 clearly hinted that the industry is gearing up to address this huge market.

Technology

Although the key industry trend is to shift to Lithium ion technology, the Indian market is still energized by lead acid batteries. The Indian battery market of which over 90% is lead acid based is growing by over 10% YoY. Indian research institutes today have Lithium ion prototyping facilities and are working on the 3^rd generation of the technology. IIT-Bombay declared that it has two patents under review for the same.

“The real question is if the industry has picked up on the research and resulted in commercialization?”

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On the global scale, the number of research publications and commercialization have been on the rise with the focus now shifting to Lithium-Sulphur batteries. Ultra-capacitors is another technology that has potential with TEEMP Inc. indicating their intent to setup facility in India to power the Hybrid Electric Vehicle mission of the country. Thermal energy storage powered by the Phase Change Material (PCM) technology is seen as the next big thing to increase energy efficiency of commercial HVAC systems.

Policy and Regulatory

The current drivers in terms of regulations is very low for storage projects. The forecasting, scheduling and deviation settlement mechanism could aid the market if the prices are lucrative. Storage projects should be treated as a flexible asset and should be added to the fleet of balancing power plants. At the Govt. level CEA has hinted at evaluating storage as part of the balancing services shortly. There was a consensus that co-benefits through market mechanisms would be the key enabler for energy storage in India.

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“Intermittent generation needs flexibility in transmission, distribution and storage. There will be a need for the right policy and regulatory framework to support this market”

Market

The market currently is driven by the inverter backup assets, as one of industry leaders indicated that close to 5-6GWh of energy storage has been sold annually in the last decade in this segment. The next big market currently is the telecom sector which is witnessing a switch from lead acid batteries to lithium ion technology. Although a nascent market, Electric Vehicles (EV) is likely to see big gains in the next couple of years owing to the launch of new models of passenger vehicles including variants of Hybrid Electric Vehicles (HEV). In comparison to these sectors, storage integration for RE generation looks small but has significant potential as the RE share increases.

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Projects

The market for large scale energy storage projects has just opened up. The first phase is witnessing a number of demonstration projects being undertaken by the Power Grid Corporation of India (PGCIL) and the Solar Energy Corporation of India (SECI). The National Thermal Power Corporation (NTPC) and the Neyveli Lignite Corporation (NLC) are gearing up with couple of large scale energy storage projects for the Andaman Islands. The recently concluded 2×2.5MWh SECI tender saw 13 bid submissions. From the private sector AES energy followed up with its maiden India project with Panasonic last year with another 10MWh project, this time with Mitsubishi and Tata Power Delhi Distribution to provide peak management and flexibility in the Delhi distribution network. A major announcement at the event was Ecoult’s partnership with Exide industries to manufacture ultra-batteries in India. A few other firms announced their portfolio expansion to assemble Li-ion batteries in India. These partnerships align with the Make in India initiative of the Govt.

Overall, as the international panel concluded a level playing field in storage needs a few issues to be resolved and energy storage should be the 4^th column of electricity market design. The market has just started to open up in India for energy storage and as one of the business heads remarked “The Indian market has caught the tail of energy storage elephant and hopefully with declining prices a bigger market is created every year and the whole elephant is seen”.

Potential for Energy Storage in India: An industry perspective

Energy storage has been a buzz world off late globally and I recently had an opportunity to attend a workshop hosted by the India Energy Storage Alliance (IESA) that focused on evaluating the potential for energy storage integration to large scale Renewable Energy (RE) projects and the Electricity Vehicle (EV) market in India. The workshop had significant interest from top RE developers in the country considering the recent tenders from Solar Energy Corporation of India (SECI) to establish a solar plus storage in the upcoming solar parks in Andhra Pradesh (AP) and Karnataka.

The potential for energy storage integration with solar and wind

In general the overall potential for energy storage stems from the fact that RE is intermittent in comparison to the power demand and hence when there is a significant increase/decrease of RE in the mix there will a period when there will be notable dip from RE in contrast to demand which in graphical terms is referred to as Duck Curve/Camel curve.

Cty:IESA

It is this period that the power sector anticipates could be served by energy storage instead of turning on/off big fossil powered plants in a chaotic manner. The scenarios are well served in developed world where the Demand Side Management (DSM) has evolved to accommodate energy storage along with the ramping of renewable energy. However, the Indian scenario will be in sharp contrast considering the Indian power demand will be significant and so will the anticipated RE capacity of 175GW by 2022.

The industry believes that the large scale storage although envisaged currently would take time to ramp up but ancillary services market could be well served by energy storage in the short and medium term until the storage technologies reach market maturity. A section of experts are of the opinion that micro grids are not getting the right attention when it comes to storage. Energy storage could be well developed and integrated to micro grid sites. In short, storage as a value proposition will be viable for storing PV during peak sunny days or even for managing morning/evening peak demand and more importantly during the ramp-up/ramp down of RE generation, i.e. the anticipated duck/camel curve.

Electric Vehicles

The electricity vehicle adoption has not been up to the expectations of the government. Even with the nascent battery technology the Revas and Amperes did enter the market and create an impression on the EVs but they failed to take off. The National Electric Mobility Mission anticipates 6 million EVs or Hybrid EVs to rule the roads by 2020. The recent FAME (Faster Adoption and Manufacturing of Electric Vehicles; a 30-60 Lakh subsidy for Electric buses) policy that was launched with a subsidy outlay from the government has created a second buzz wave. It is aptly aided by the new generation vehicles from Mahindra and Ather energy, the latter in particular has taken the 2 wheeler EV market in India by storm, akin to the impact of iPod entry in the music industry (Follower beats the industry leaders).

Cty:IESA

Aside to the passenger vehicles and its market, leading industry players are also investing significantly in the R&D of electric buses. Policy makers likewise have their task cut out in assimilating industry and market information from other countries where EV has been successful in trying to creating the right framework that facilitates the development of associated infrastructure that enables the operation of electric buses.

Overall, the market for energy storage looks promising although the Ministry for New and Renewable Energy (MNRE) anticipates the large scale adoption to kick in only close to 2020 with R&D and demonstration projects occupying the space until then. On the contrary, the road map for EVs are very optimistic with economic viability forecast in the next couple of years and India could see large scale manufacturing facilities in operation by 2020. However, like for any futuristic project of this scale a clear direction through policies and regulations is needed. For e.g. the ancillary service market in India has still not gained expected traction owing to lack of policies (read more). Similarly for EV and the sector to develop policies related to EV charging and reverse feed in tariffs have to be laid down. Nevertheless, there is some optimism in the air!