Time to Prioritise Energy Storage in India

Context

India’s shift to renewable energy is gaining pace, but managing intermittency and peak demand remains a challenge. Recent developments in Andhra Pradesh and debates on power swapping have renewed focus on energy banking and storage as key to India’s clean energy strategy.

Understanding Power Swapping

• Power swapping refers to an agreement between two States or utilities to exchange electricity to manage fluctuations in supply and demand.
  • A State with surplus electricity during a particular season or time of day supplies power to another State facing a shortage.
  • Later, the process is reversed when the first State faces high demand.
  • This mechanism allows both to save on high-cost short-term purchases and ensure supply stability.
• Advantages:
  • Helps States avoid purchasing expensive electricity from spot markets.
  • Improves utilization of idle power generation capacity.
  • Enables short-term balancing of demand and supply.
• Limitations:
  • Transmission Costs and Losses: Inter-State power transfers attract transmission charges and energy losses, reducing cost efficiency.
  • Short-Term Fix: It addresses temporary supply gaps but does not solve long-term grid stability or renewable intermittency.
  • Dependence on Other States: Swapping relies on another State’s surplus availability, which may not always coincide.
  • No Support for Renewable Storage: It doesn’t address the surplus solar or wind energy that goes unutilized during off-peak hours.

Thus, while power swapping can help States manage seasonal electricity fluctuations, it cannot be the foundation of India’s clean energy strategy.

Energy Banking: The Sustainable Alternative

• Energy banking allows renewable energy producers to store surplus electricity in the grid or in a storage system for withdrawal during deficit periods.
• It acts as a financial and operational mechanism that:
  • Stabilizes the grid against renewable fluctuations,
  • Enables producers to earn better returns by selling power during peak demand, and
  • Reduces wastage of green energy.
• Mechanism:
  • During high generation (e.g., daytime solar surplus), electricity is “banked” with the grid.
  • It is then withdrawn at night or during peak hours when renewable generation drops.
  • States or Discoms can monetize this by trading banked energy under capacity trading models.
• Key Technologies:
  • Battery Energy Storage Systems (BESS) – lithium-ion and emerging sodium-ion batteries.
  • Pumped Hydro Energy Storage (PHES) – uses surplus energy to pump water uphill, releasing it to generate power later.
  • Thermal Storage Systems – store heat energy for use in power or industrial processes.
  • Compressed Air Energy Storage (CAES) – stores energy by compressing air in underground reservoirs.
• Why Energy Storage is Crucial:
  • Renewable sources like solar and wind are intermittent – they generate power when sunlight or wind is available, not necessarily when demand peaks.
  • Storage allows this power to be captured and released when required.
  • Without storage, surplus renewable power gets curtailed or wasted, undermining economic and environmental goals.

Challenges in Energy Storage and Banking

• High Capital Costs: Battery storage costs remain high (~₹8–10 crore/MWh), limiting large-scale adoption.
• Policy and Regulatory Gaps: No uniform national policy governing inter-State energy banking.
• Limited Indigenous Manufacturing: Dependence on imported lithium, cobalt, and nickel increases costs and vulnerability to global supply disruptions.
• Technological Uncertainty: Rapid evolution of battery chemistries creates investment risks for developers.
• Financial Health of Discoms: Many Discoms are unable to invest in storage infrastructure due to poor financial conditions.
• Land and Environmental Clearances: Pumped hydro projects face long gestation periods and ecological concerns.

Way Forward

• National Energy Banking Policy: Establish a unified framework for inter-State renewable energy banking and capacity trading to efficiently utilize surplus power.
• Accelerate Storage Deployment: Integrate energy storage obligations with Renewable Purchase Obligations (RPOs) and provide Viability Gap Funding (VGF) for grid-scale projects.
• Boost Domestic Manufacturing: Expand PLI schemes and incentivize R&D in next-generation battery technologies (sodium-ion, flow, solid-state).
• Promote Hybrid Projects: Encourage solar–wind–storage hybrids for 24×7 renewable power through streamlined approvals and tariffs.
• Strengthen Pumped Hydro Capacity: Fast-track sustainable Pumped Hydro Energy Storage (PHES) projects using existing reservoirs to minimize environmental impact.
• Improve Discom Finances: Enhance payment discipline and financial health of Discoms to enable investment in modern storage infrastructure.

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