Even though the country has missed out on manufacturing opportunities in the past, as it happened with the solar sector, storage is one of the emerging areas which is also critical for the national energy security programme. The government recently approved the PLI scheme on ACC battery storage for achieving manufacturing capacity of 50 giga-watt-hour (GWh) with an outlay of Rs 18,100 crore. Rahul Walawalkar, president of the India Energy Storage Alliance, tells FE’s Anupam Chatterjee he believes the scheme can provide the right platform for the industry to turn India into a global storage manufacturing hub. Excerpts:
Is the incentive of Rs 2,000 per kWh sufficient to attract industry?
The incentive of Rs 2,000/unit offered under PLI is a good amount. In fact, practically we expect most of the companies to receive much lower incentives. The incentive is contingent on the domestic value capture and in the initial years, this domestic value capture is expected to be around 50% and the companies will be incentivised accordingly. However, we feel that it is sufficient to help the industry get through some of the teething inefficiencies which we will have when we start the plants. The scheme structure provides higher incentive for companies manufacturing advanced cells.
How about the market for storage products in the country?
The government is giving five years to scale up manufacturing capacity to 50 GWh and we do expect that the domestic demand itself will cross this capacity by 2026 or 2027. We think the stationary market (mostly power sector) will contribute to most of the demand growth till 2025, and beyond that, the electric vehicle market will start taking up the larger share. In other parts of the world such as the US, Europe and Australia, GWh scale storage deployment has been happening for the last couple of years because policy makers in these countries did detailed cost benefit analysis back in 2012-13. Unfortunately in India, policy makers had been looking for cheaper solutions and while were waiting for it, cost has fallen down by around 50% in the last five years.
Does that mean we have missed out the opportunity?
We are definitely late. But the good part is, there has been a lot of changes in the technology front. Right now China is the dominant player and the US has less than 40 GWh of manufacturing capacity, while Europe has around 20-30 GWh. The other countries do not have a huge lead, so if we move fast right now, we can catch up. We are late by 2-3 years, but if we now run, we can still catch the train.
Will locally manufactured products be cheaper than imports?
There are companies which are setting up 100 GWh storage manufacturing units outside, so it is impossible for domestic players with much lower capacities to match their rates. It will take some time to build the capacities and achieve the economy of scale for local companies to become competitive without any government support.
How do you expect the manufacturing industry to react to the PLI scheme?
We expect the government to receive bids for 70-100 GWh and anticipate around five to seven companies to benefit from the scheme. Right now it is easier to name the handful of large companies which have not shown any interest in the energy storage sector. Currently, we do not have the entire supply chain in India.
The cell prices are also expected to keep dropping. So, we expect the government incentive to be in the range of Rs 1,000/unit or thereabouts, which is sufficient to overcome the initial challenges for the industry. In another two years, import duties are also expected to be levied on the cells. On a ballpark basis, it requires investment of $50-75 million per GWh for setting up manufacturing capacities, depending on the technologies to be used.
Aren’t there raw material supply constraints?
For lithium-ion batteries, lithium comprises only 3-5% of the total material cost. Many other materials like nickel, manganese, cobalt, aluminum, copper, graphite are also required. India has sufficient reserves for a number of these elements. India may not have traditional reserves for items like lithium, but countries like Australia and Bolivia are very much eager to supply these materials to us and we can process them to make battery-grade products. The shortage of raw materials is more of a distraction and these are not the main issues. There are challenges in the processing side, but India has a very strong chemical industry.
