Key industry drivers for battery adoption

4.1 Power outages

Availability of grid electricity and power-cut durations has been key driver for adoption of battery based
backup systems in residential segment. Most of the Indian states still suffer from prolonged electric
outages, particularly during summer months (Fig. 6). The reliability of grid has improved over the time
but it is still a long way before we start getting un-interrupted grid electricity.

4.2 Cost of grid vs. solar

Grid electricity for the residential sector is highly subsidised and cost much lower than solar power. Grid
tariff for average consumers range between INR 1.8 to INR 6.5 per unit depending on monthly
consumption and state. Grid tariffs are even higher (up to INR 12/unit) for domestic consumers (at certain
consumption slabs) in some of the states. Tariff for solar system without battery backup is at-least INR 6-
7 per unit and with battery backup system this could go up to INR 14 per unit. The large difference
between grid and solar tariff is hindering the penetration of solar and battery backup system in residential
segment. However, the two are converging fast. Grid tariffs are continuously rising at an average rate 6%
per annum. Along with this, the cost of solar system is also decreasing at a rate of 5% annually. With these
rates, by 2020, solar systems could be cost competitive with the grid for residential consumers as well. 13
 Energy Storage in India Applications in the Renewable Energy Segment
For commercial and industrial consumers, cost of power from solar is already cheaper than grid tariff.
Further, increasing grid tariffs will make already cost competitive solar system more economically viable
alternative in future. As per CEEW’s analysis, given the current trends of decrease in solar price and
increasing grid tariff, it is expected that the grid tariff will surpass the tariffs from solar plus battery
systems by 2020. This will further increase the demand for batteries to utilise maximum available roof
area to provide solar electricity during evening and night hours at lower rates than grid tariff.

4.3 ‘Time of Day’ tariff

Time-of-day tariff- higher electricity tariff during peak consumption periods of the day is employed on
grid connected consumers to curtail the peak power demand. In the time-of-day regime, consumers tend
to install battery backup to supplement their energy demand from batteries during peak hours. In India,
‘time-of-day’ tariffs are currently applicable to HT consumers only and that too only in a handful of states.
However, government is considering the introduction of time-of-day tariff to residential and commercial
consumers as well. NITI Aayog is tasked with conducting a detailed analysis to evaluate the applicability
of time-of -day tariff for residential and commercial consumers. Addition of time-of-day charges in
electricity bill will result in increased demand for batteries.

4.4 Access to electricity

Stand-alone systems like solar home systems, micro/mini-grids will play an important role in solving
energy problems in rural India. Micro-grids can operate independently, in island mode, or be connected
to the utility power grid. They can meet the growing power demand of consumers whether it is connected
through grid or operating in islanded mode. Micro-grids along with storage will allow for fast installation
of electricity supply without the need for expensive transmission infrastructure investments and the
lengthy development approval and construction process. Solar micro/mini-grid system, since energy is
need to be supplied during evening and night hours to rural households, depends solely on batteries to
store the energy.
As stated earlier, MNRE’s initiative to deploy at least 10,000 RE based micro and mini grids across the
country with a minimum installed RE capacity of 500 MW in next 5 years will alone create an opportunity
for more than 2.2 million batteries of 1kWh each. Private companies operating in micro/mini-grid
segment have also set aggressive targets which will further fuel the demand for batteries.

4.5 Grid scale storage

With increasing share of renewable energies in national grid, will provide opportunities for advance
battery technologies for hitherto unexplored areas such as ancillary services, peak shaving, grid stability,
renewable integration to the grid and forecasting. Foreseeing the necessity of grid scale storage, Ministry
of New and Renewable Energy has launched multiple pilot projects recently.
Most promising of these pilots is the recently floated tender by NTPC, inviting bids for 625 MW of Solar
PV with storage, in Andhra Pradesh. This tender has a storage component of 100 MWh. This will be the
first utility scale storage tender in India. SECI also floated a tender for 2.5 MW of hybrid solar and wind
project with 1Mwh of storage. (19) The private sector too is testing energy storage options and
transitioning to batteries (away from diesel generators) for a more secure and sustainable energy system.
Panasonic India and AES India Private Limited announced an agreement to construct a 10 MW energy
storage array at Panasonic's Technopark manufacturing facility in Haryana. (20) These initiatives will
certainly help in ushering in new energy storage technologies in India.14
5. Barriers to the proliferation of
storage for RE applications
5.1 Cost of battery technologies
Consumers and solar installers in solar photovoltaic segment are highly cost sensitive. The back-up
system (batteries) could increase the upfront cost of solar system by up to 50% along with additional
maintenance and replacement cost associated with batteries. This makes the system less viable
economically. This also leads to under designed battery backup systems.

5.2 Maintenance requirements and performance of battery system

Solar system can run without or minimum maintenance for the entire life of project. However, when
batteries are introduced in the system, they require regular maintenance and replacement of batteries
every few years. Reoccurring cost of battery replacement works against the notion of “free power for 25
years” by investing only once. Also, battery performance is very unreliable and largely depends on usages.
Shortfall in battery performance is directly blamed on solar companies. To avoid such situation,
companies prefer to install grid-integrated solar systems without battery backup.

5.3 Net-metering policy

As the focus on grid connected solar rooftop grows, there is wide spread adoption of net-metering policies
in states around the country. Due to the nature of net metering policies, solar rooftops are unlikely to drive
up demand for energy storage solutions, in case the grid is reliable and offers nearly 24 x 7 power supply.
Net metering effectively converts the local grid into a battery. Excess power generated at household level
is immediately fed into the grid, leaving no need for any additional storage solution to be deployed.
However, in regions where there are many power outages or too many scheduled/unscheduled power
cuts, rooftop owners are likely to adopt energy storage solutions, to store the solar power generated on
site almost like a captive solar unit.
Also, there are differences among net metering policies of various states. One such difference that can
affect energy storage market is on what basis do states charge customers post net metering.
Implementation of net-metering will reduce the grid based energy consumption of these customers and
help them fall into the lower tariff slabs but there are states such as West Bengal which don’t recognise
this and still charge these customers at higher slabs. (21) States like Delhi, Gujarat allow customers to fall
into lower slabs and enjoy the benefits. (22) Customers will tend to consume all the generated power
onsite instead of feeding it to grid in case of West Bengal than in Delhi. Hence this policy arbitrage can still
lead to a thriving energy storage market even with adoption of net metering in states like West Bengal. 15
 Energy Storage in India Applications in the Renewable Energy Segment

5.4 Improving power availability scenarios

One of the important challenges to improving the penetration of battery technologies is the improving
power availability scenario in existing markets. While data to back this is limited, at-least national
statistics seem to suggest that the overall deficit in electricity supply is seeing a significant drop.
Anecdotal evidence suggests that this is the case in Tier-1 cities while the situation in newly electrified
areas and smaller towns could still be as poor. It is unlikely that the government will hit their target of
24x7 electricity supply and the demand for backup systems will still remain robust in newly electrified
areas. As a result, the important transition would be in the shift of the markets away from traditional
centres (in large cities) to smaller cities and towns and even rural areas. While the net-metering policy
(seemingly) is against the interest of battery manufacturers, it is a distorting incentive which is not likely
to be a permanent fixture or a successful one given the state of utility finances. Eventually, a situation with
high grid tariffs could incentivise autonomous consumption from roof-top of local generation and this
would then drive up demand for efficient storage technologies.

5.5 Limitation of the business model adopted by developers

Solar developers that are catering to industrial consumers are acting as an independent power producer
who uses the roof space on lease, for solar installation, and sells power to industrial consumer itself. In
order to maximise the profit by selling the entire generated power to the consumer, limit the solar system
capacity such that it only meets base load. Further, there is no incentive for a solar company to sell power
at INR 14 units (the cost of electricity when backup is considered) where grid power is available at lower
rates.

Indian battery market and associated challenges

For solar applications in India tubular flooded lead acid batteries and VRLA batteries are predominantly
used along with Ni-Cd and Li-ion batteries for a very few specific applications. Batteries are preferred to
be connected in series to achieve higher voltages. In case of large number of batteries, series and parallel
combinations are configured. Also, parallel combination is limited(preferably) to two strings only.
• Flooded Tubular Batteries
It has been observed that on average tubular flooded batteries achieve desired cycle life and in some cases
outperforms the expected cycle life. These batteries are designed at 50-70% of depth of discharge.
Cycle life of a battery largely depends on usage patterns which has been discussed in following
section. Flooded batteries are able to achieve about 600 – 900 cycles for different depth of discharge
levels, based on our interaction with companies catering to different geographies (climatic and local
environment conditions).
Tubular flooded batteries require regular maintenance. Distilled water needs to be refilled on interval of
6 months and terminals also need to be cleaned to avoid corrosion. Tubular batteries also exhibit
higher tolerance to temperature variations and harsh environments as compared to VRLA batteries.
• VRLA Batteries
Depth of discharge in VRLA batteries is limited to 40% of total battery. VRLA batteries very sensitive to
temperature. VRLA batteries have not been able to meet the desired cycle life and constantly
underperformed for solar applications. Observations shows that VRLA batteries only last for 400-
600 cycle life with 3 years of overall life.
For both VRLA and Flooded batteries, 12V modules are preferred for solar applications.
6.1 Technical challenges
6.1.1 BATTERY CHARGING PATTERN
Different battery manufacturers and technologies offers different charging patterns to improve the overall
charging duration and life of battery. Inverters are needed to be configured accordingly which pose a
limitation. This has been faced particularly with Li-ion battery technologies where up to 7 different
charging steps are followed based on different state of charge in the battery. Specific chagrining pattern
also restrict the choice of inverters and in some cases, force to purchase the inverter from an international
company which further add to the cost of system. 17
6.1.2 MEMORY EFFECT
Lead-acid batteries need to be charged and discharged to rated capacities once every 4 months to avoid
the memory effect. Lack of maintenance could significantly reduce the energy capacity of battery.
6.1.3 SURGE CURRENT
In the hybrid systems when load is switched from grid to battery, an instantaneous high current is drawn
from batteries which reduces the capacity of a battery in longer term.
6.1.4 BOOST CHARGE
Solar systems also cater to consumers in remote locations where grid in not available. Batteries when
discharged beyond the designed cut-off, require high boost charge to start the recharging process. Power
generated from solar is not able to provide the required boost charge. This requires transporting either
batteries to charging stations or charging through diesel generator which again need to be transported to
solar site. VRLA batteries are more prone to this issue.
6.1.5 HIGH DISCHARGE RATE
Consumers add additional loads to the existing system which put additional load on the batteries and the
entire system becomes under-designed. The high rate of discharge again reduces the capacity and life of
the battery.
6.1.6 C-RATE
Batteries are rated at C-10 and C-20 discharge rate whereas in solar applications, desired discharge rate
is C-5 to sustain high discharge current.
6.1.7 LOW MAINTENANCE DEEP-DISCHARGE BATTERIES
Deep discharge batteries are not recommended for solar applications in areas where grid is not available
due to requirement of high charge to re-charge the battery.
6.1.8 BATTERY MANAGEMENT SYSTEM
Due to intermittent power generation nature of solar system, a battery management system is required
to charge the battery at specified voltage and current levels. Battery management system is also important
to configure battery with inverter system and during battery discharge, to manage appropriate depth of
discharge and avoid surge currents.
6.1.9 INDUCTIVE LOAD
Lead acid batteries are not suitable for large inductive loads in an industrial setup. Solar companies are
exploring batteries which can cater to inductive loads as well.
6.1.10 UNDER-DESIGNED BACKUP SYSTEM
Some of the solar players themselves under-design the battery backup to keep the system cost on lower
side. This results in deep-discharge of batteries which again reduces the life span significantly. 18
6.2 Operational challenges
6.2.1 HIGH DEPTH OF DISCHARGE
In case of under-designed backup systems or longer power outages, consumers tend to use batteries
beyond specified depth of discharge. Options to over-ride design depth-of-discharge must be kept limited
and less to the discretion of the consumers.
6.2.2 HEAVY LOADS
In urban areas consumers run heavy loads such as ACs directly from batteries and in rural areas
consumers run electrical machineries by batteries which drain the battery faster and reduces the overall
life.
6.2.3 DISTILLED WATER REQUIREMENT
In remote locations where distil water is not available, an additional solar distillation plant is deployed to
generate distil water. This additional system increases to cost of overall system and reduces economic
viability. This opens up opportunities for maintenance free batteries.
6.2.4 DISTILLED WATER REFILL FREQUENCY
Similar to previous point, it desired to have minimum refill frequency. Currently, in flooded tubular
batteries, distil water need to be refilled every 6-month’s interval.
6.2.5 ACID SPILLAGE
Due to high operating temperatures, acid spillage has been reported. This is also linked to poor design of
batteries from local manufacturers.
6.2.6 TRANSPORTATION
Transporting lead-acid batteries has been again a challenge for micro-grid players who are operating
remote areas. There have been cases of damage to batteries and acid spillage. Along with this, due to high
weight and volume, the transportation costs are also significant.
6.2.7 REPLACEMENT
Frequent replacement of batteries is not desired specially in-case of remote locations where frequent
replacement over long distances increases operational expenditure significantly.
6.2.8 DIRECTLY CONNECTED LOADS
It has also been observed both in urban and rural areas that consumers sometime directly connect the
loads to the battery which then results in deep-discharge of the battery.
6.2.9 HOME INVERTER FOR SOLAR APPLICATIONS
Consumers sometime use the home inverter for solar system. Since the availability of power from solar is
different than grid, it hampers the charging and discharging of the battery.19
 Energy Storage in India Applications in the Renewable Energy Segment

6.3 Commercial challenges

6.3.1 CAPITAL COST
Roof-top solar market is highly cost sensitive and batteries add significant cost to solar system. 1 kW roof-
top solar system with battery backup is almost 40% costlier than grid-tied solar system.
6.3.2 HIGH MAINTENANCE COST
Due to shorter cycle life of lead-acid batteries, they need to be replaced every 4-5 years which increases
operational cost of solar system significantly.
6.3.3 AFTER SALE SERVICES
After sale services are highly valued by solar companies. After sale services are required for technical
support, replacement of batteries etc.
Customer support from battery manufacturers varies from location to location. Exide batteries has
stronghold in eastern India whereas in Rajasthan they are not able to provide effective after sale services.

6.4 Commercial challenges (advance battery technologies)

6.4.1 HIGH DEPENDENCE ON BATTERY MANUFACTURER
Adoption of advanced battery technologies is likely to be driven by manufacturers rather than a demand
pull from consumers. Due to a lack of technical understanding the retail consumers rely on manufacturers
and contractors to arrive at the right solution.
6.4.2 HIGH LEAD TIME
Companies providing advance battery technologies in India have a high lead time to import batteries from
their factory in home country, since these companies are not manufacturing batteries locally. Lead time
for Trojan batteries in India is about 30-40 days.
6.4.3 CUSTOM DUTIES
Custom duties could be as high as 35% of cost of battery which will increase the cost of battery
significantly. Increase in cost could surpasses the performance benefit which an advance could offer.
6.4.4 UPFRONT PAYMENTS
Requirement of upfront payment and high lead time make the offer non attractive.
6.4.5 AFTER SALE SERVICES
Due to low quantum of sales in local market, advance battery companies are not able to scale-up their
network and are not able to meet after sale service requirements.
Pricing

A major new Deutsche Bank report has predicted that energy storage – the “missing link of
solar adoption” – will be cheap enough – and technologically ready – to be deployed on a
large-scale within the next five years.
The solar industry report, published on Friday, said that while costs for the greater majority of
available battery technologies remained prohibitive, economically competitive batteries were
the “killer app” and the “holy grail” of solar penetration.
But with many costs already lower than published literature would suggest, Deutsche Bank
believes this ultimate solar and renewable energy goal might not be far out of reach.
“Using conservative assumptions and no incentives, our model indicates that the incremental
cost of storage will decrease from ~14c/kWh today to ~2c/kWh within the next five years,”
the report says.
“When overall system cost decreases are considered, we believe solar + batteries will be a
clear financial choice in mature solar markets in the future.”
Currently, according to Deutsche, the cost of a typical lead-acid battery may be as low as
~$200/kWh, while best in class lithium-ion technology was producing commercial/utility
packages in the ~$500/kWh range at end 2014 – half the cost of the ~$1000/kWh 12 months
prior.
“We believe 20-30 per cent yearly cost reduction is likely (for lithium-ion batteries), which
could bring (them) at commercial/utility scale to the point of mass adoption potential before
2020,” the report says.
Deutsche points to the commercial-scale market as one of the first areas where battery
deployment will flourish, due to clear economic rationale.
“Commercial customers are often subject to demand based charges, which can account for as
much as half of the electric bill in some months,” Deutsche says.
“We think companies with differentiated battery solutions coupled with intelligent software
and predictive analytics that work with the grid to avoid these charges and smooth electric
demand will pave the way for mass adoption.”
The report also points to utilities as a major market for batteries on a large scale, as costs drop
and distributed renewable energy generation deployments increase.
On the residential level, the report said households were still unlikely to go down the energy
storage path in the short term, without proper pricing mechanisms in place, or access to solar
plus storage energy packages.
But again, Deutsche sees this as as a major, untapped opportunity for utilities: “Over the next
decade, we see a substantial opportunity for utilities to utilize smart grids through residential
battery aggregation.”
Properly incentivised, the report says, utilities could begin to aggregate neighborhoods of solar
+ batteries to behave as a single source of load reduction.

“Batteries could be dispatched as needed to reduce peak demand across the system. In a high
grid-
penetration scenario, this could reasonably lower the necessary capacity from conventional
generation sources.
“In turn, we think it is reasonable to hypothesize that lowered capacity needs from lowered
peak demand would simultaneously lower the need for large up front capital investment in
peaker plants.”
Deutsche sites two likely scenarios that would enable this sort of utility-driven household
battery deployment: Third party leasing companies and individuals work with the utilities; or
a shift in regulatory framework that allows utilities to include residential solar in their rate
base.
“Both of these scenarios would likely significantly improve reliability, enable microgrids to
function as needed, and improve grid resiliency during emergency situations,” the report says.
So what sort of batteries will homes, businesses and utilities be using? As the table below
shows, there is quite a range of key technologies that, according to Deutsche, have the potential
to be longer-term energy storage solutions, subject to technological feasability and cost.

And while lithium-ion and other electrochemical based batteries are still the most commonly
discussed – AES Energy calls lithium-ion as the chemistry of choice for the next decade – the
Deutsche report details a wide range of potential new technologies looking to fill the need for
on grid storage.
Flow batteries, for example, while a relatively new technology and probably not likely to make
a big impact on the market for several years, are tipped by Deutsche to be suited to large-scale
utility storage with potential for long-term adoption.
Typically consisting of two tanks of liquids (electrolyte) which are pumped past a membrane
held between two electrodes to store and generate electricity, flow batteries have the
advantages of ease of scaling, reliability, and long life.
Varieties of flow batteries include Iron-Chromium, Vanadium Redox and Zinc-Bromine.
Deutsche notes that recently, EnerVault dedicated its first commercial flow battery-based
energy storage system in California.
In Australia, Brisbane-based company Redflow is fast-tracking the rollout of the latest
iteration of its unique zinc bromide flow battery to the residential and mining sectors, the costs
for which, it says, are 40 per cent cheaper than its first generation products, and are now
approaching grid tariffs in some markets.
Elsewhere, start-ups are raising funds to scale up manufacturing of products such as EOS
energy’s hybrid Zinc cathode, aqueous electrolyte based battery.
Once fully ramped, EOS says the battery will have 75 per cent round trip efficiency, a 30 year
lifetime, and a cost of $160/kWh. As Deutsche points out, zinc is a much cheaper material than
lithium, but has problems with electrode
corrosion and build-up.
EOS has solved this problem by using a proprietary coating that creates a permanently
conductive and non-corrosive surface.
Another start-up, Aquion Energy has raised more than $150M in equity and debt to deploy
more than 1MW of sodium-
ion batteries at $300/kWh price point.
Aquion’s six-stack module, which is roughly the size of a refrigerator, can produce 10kWh,
while its larger 100kWh cube module was recently deployed in Hawaii, where 40 units will be
shipped during first quarter 2015.