India's grid-scale moment

Batteries will power the future economy. India must seize the opportunity to build a globally competitive industry that goes beyond lithium-ion

India’s energy demand is growing at about the same rate as its gross domestic product or GDP. If the economy becomes five to six times its current size in another 20 years, so will the energy demand. Moreover, electricity will power the bulk of economic activity in the country. As a result, massive power-generation capacity will need to come up in the very near future. 

It is also true that renewable energy, specifically wind and solar, is a very cheap source of power.  They will also become cheaper over time. However, they supply electricity intermittently, while power demand is volatile. This is a key problem for utilities or electricity distribution companies.   

To match intermittent supply with volatile demand requires some form of electricity storage that can be drawn at will. The scales would be massive and the storage needs will be large as well. 

Fortunately, many technological alternatives exist that can help meet such demand-supply gaps. But water, compressed air, and brine-based energy storage solutions are difficult to scale-up.  And, the most used alternative, the lithium-ion battery, is controlled by China and will continue to be for the next five to 10 years.   

Each energy storage system has a different set of advantages. While their use is increasing, they are not currently used at scale. If they could be produced at scale, their costs would be significantly lower. Moreover, typically larger setups are better able to attract resources for research and innovation. 

And, therefore, India has a great opportunity and challenge for industrial policy on utility-scale power storage. India could do either of three things. The first is to be agnostic to the technology and support any type of battery-based storage.  Roughly, this is what India does currently. The second is to reverse industrial policy, and actively dissuade lithium-ion batteries, letting the industry decide on other alternatives. And the third is to choose a specific type of battery and direct investments towards it. 

While technological agnosticism is generally a superior policy solution, focusing on lithium-ion batteries will mean dependence on China for the next decade or so, if not more. India thus needs a policy that seeks to catalyse a new battery industry. 

A successful industrial policy for grid-scale storage would, therefore, have three elements. One, it would specify what it is trying to prevent; in this case, it would be lithium-ion. Two, it would seek to promote other technologies. In this, it may specify sodium-ion batteries or be agnostic. And three, it would ensure that an enabling ecosystem is created for new technologies — both financial and regulatory constraints, if any, need to be addressed.  

The first step in any policy change is to identify the objective. India’s grid storage mission must adopt an approach that is not just China-resilient but one aimed at harnessing global opportunity. A large market in battery-based storage is opening up not only in India but globally. Just as India is electrifying at a fast pace, so are most other economies, and all have the same needs currently mostly being met by China. Therefore, India needs to think of an alternative that could help it access the global energy-storage market. This market is not just about batteries for achieving energy transition, but also to power the large data centres that need seamless electricity supply.    

The second step would be to promote demand for non-lithium grid-storage batteries. And it is here that policymakers will need to better understand industry compulsions. No other battery has been around for a long time, and therefore many parameters, degradation rates, lifespans, efficiency levels are not as well understood for new technologies as they are for lithium-ion batteries.  Left to itself, the market will tend to prefer the well-known technology to new unknown ones.  Recall that the government tried to catalyse India’s renewable energy transition by mandating discoms to purchase renewable energy. A similar mandate, of say a minimum of a quarter of total energy storage using non-lithium storage, would help create early demand for other forms of batteries. This would need to be expanded over time. 

Third, the world, including India, has underinvested in the development of sodium-ion batteries, one of the most likely alternatives to lithium-ion.  These batteries have several advantages: Key inputs are mostly available in India, are low-cost when produced at scale, they are environmentally less harmful, and less susceptible to overheating, among others. Currently, they are marginally less efficient and costlier than lithium-ion batteries, but scale should help cover some of the ever-narrowing gap between sodium-ion and lithium  

batteries. India has some ongoing initiatives and pilots, but more is required. A great opportunity lies ahead if India can crack the sodium-ion battery ecosystem.    

Fourth, the current production-linked incentive (PLI) scheme for battery storage aims to incentivise domestic and global companies to set up giga-scale Advanced Chemistry Cell (ACC) manufacturing and battery storage facilities in India. As mentioned before, it is technology-agnostic. A variant of the same scheme that focuses on non-lithium grid-scale storage needs to be created that rewards domestic alternatives on the basis of domestic value addition rather than being output-based. As soon as domestic value added enters the PLI equation, lithium becomes less attractive an option. 

Fifth, an ecosystem approach is critical for kickstarting a whole new industry. Financial institutions such as the Small Industries Development Bank of India  and the Indian Renewable Energy Development Agency Ltd can provide greater support or better terms to utility-scale storage that has a high level of domestic value addition. 

Greater research & development allocations, especially in upstream technologies, such as anode and cathodes, would help. Startups in this space can be funded out of various government schemes.  These could be further enabled by capex grants for both incumbents and new entrants. At the same time, a relook at the regulations would help. Many hazmat rules that apply to storage and transport of batteries, among others, currently appear to be designed for lithium-ion batteries, which would need to be corrected. 

The larger point being made is that batteries lie at the heart of the future economy, and it would be a good idea to take the driver’s seat on this opportunity.  

 

The writer heads the Centre for Social and Economic Progress. The views are personal