Battery-storage costs must drop 15% to avoid new coal capacity: Report

India might avoid building new coal plants and could limit its coal capacity to planned levels by 2032 if the cost of battery-storage systems drops by 15 per cent annually, according to a new report.

Nearly 75 per cent of India's electricity is generated using coal. However, to meet its goal of reaching net-zero emissions by 2070, the country needs to reduce its dependence on coal and increase the use of renewable-energy sources like solar and wind power.

The challenge is that solar and wind power plants only generate electricity when the sun is shining or the wind is blowing. Therefore, energy-storage systems are needed to store this energy and use it during periods of low generation.

The report compiled by global energy think tank Ember and the Delhi-based The Energy and Resources Institute (TERI) says if the battery energy storage system (BESS) costs continue to decline at the current rate of 7 per cent annually, India's power sector will see coal generation plateauing until 2032, while additional coal capacity may still be needed to meet the demand during non-solar hours.

This is mainly because slow storage growth will hinder sustained renewable energy expansion once India's solar share in the power mix crosses 25 per cent. Currently, solar accounts for around 7 per cent of India's total power generation.

"And if BESS costs fall by 15 per cent on average each year, it would enable India to potentially limit its coal capacity to the 14th National Electricity Plan projection of 260 GW by 2032," the report reads.

It also notes that if the battery costs fall faster, the power sector could rely more on renewable energy, meeting 83 per cent of the electricity demand during the day by 2032. However, during non-solar hours, renewable energy might only cover 38 per cent of the demand due to the current storage limitations.

The report says building new coal capacity comes with risks and challenges. Coal capacity would need to ramp up and down more frequently, and if the BESS costs fall faster than anticipated, these new plants would face severe lock-in and underutilisation risks.

A K Saxena, senior director of electricity and renewables at the TERI, said: "Energy storage holds the key to the decarbonisation of electricity generation. A reduction in the cost of storage options would accelerate the energy transition in economies."

No new coal additions might be needed if the BESS costs, excluding the cost of finance, fall to around Rs 60 lakh per megawatt-hour (MWh).

While recent declines in the BESS costs have been significant, the report says they need to drop by more than 50 per cent from the current levels to follow a least-cost pathway that avoids new coal capacity, especially for meeting non-solar demand.

Neshwin Rodrigues, electricity policy analyst at Ember, said: "Planners will now need to consider strategies for shifting solar generation to non-solar hours to ensure that the pace of the transition does not slow down. Therefore, while declining battery-storage costs are crucial, it is also important to focus on increasing the annual renewable-energy capacity, securing necessary financing and enhancing coal plant flexibility."

Nayeem Khan, a research associate at the TERI, said: "Accelerated growth in solar and wind, the development of pumped hydro projects and cost-competitive low-carbon technologies like BESS are essential for India to avoid new coal capacity.