Can Solar + Storage Beat Coal In India?

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MS. MONIKA RATHI
Head Business Development –
EPC India & SEA markets
Mahindra Susten

Solar Generation Costs with a minimum tariff of 2.44 Rs/unit have already made solar during the daytime cheaper than the coal plants. If the Sun was shining for the entire 24 hrs and modules generating power for the same time, Solar would have been the choice of energy. However, it is the intermittent nature of renewable power due to which coal has still been the preferred choice for Round the Clock Power. This is however set to change with disruption coming in from the combination of solar and storage solutions. 

The way technology moved from CRT to LED based displays, film-based camera to Digital camera,  typewriters to computers & printers, similar disruption has been seeded into the Indian energy market. The successful completion of Peak Power tender 1200MW/ 3000 MWh by  SECI for the world’s largest renewable with energy storage bid has yielded tariffs which are far lower than expected. Greenko emerged as the lowest bidder with weighted average tariff of Rs.4.04/kWh considering pumped storage and Renew with battery storage has won the tender at weighted average of Rs.4.30 per unit. The uniqueness of the tender is the assured supply of 600 MW of clean power for 6 hours daily during peak demand hours. The requirement of electricity supply during Peak Hours is to be mandatory met on a day-to-day basis thereby meeting the requirement of DISCOMS for  firm, predictable power. 

With this, thermal power is set to see the settling days, while the sun will shine brighter. Even, the most recent thermal power tenders in the country have resulted in levelized tariffs in the range of Rs. 5.00- 7.00/kWh @ 85% annual PLF, thereby giving an edge to this peak power tender. The improvements in storage technology has been at the forefront leading to this change. Batteries, Flywheel solutions, Pumped Storage, Thermal storage , all technologies have seen improvement over the last few years. The improvements have been in terms of higher efficiencies, lower costs & optimized ways to manage charge/discharge cycles. This in turn has resulted in longer life cycles, thereby making the technology attractive. The biggest development has been in the field of batteries, specially Lithium-ion (Li-ion) and  Nickel metal hydride (Ni-MeH), which has also been fueled by demand in the electric vehicle and transport segment. The battery prices have fallen from Rs.400 $/kWh in 2015 to lower than 200$/kWh in 2019. The volumes anticipated for batteries in the electric vehicle segment is bound to bring the prices further down. This will usher a new era for renewable energy, bringing radical changes to the way batteries will be used for renewable integration, meet peak requirements, help in frequency regulation, peak shaving and load leveling. The effects of the same are already seen with many such battery-based tenders on rise within India. Some tenders floated are by SECI for Andaman, Leh, Kaza and NTPC for Port Blair.

Renewable integration with storage technologies has provided the right impetus India needs to reach its ambitious target of having 450 GW of renewable energy by 2030. The renewable with storage wave is unstoppable !!

MR. ASHISH SINGLA
Energy Markets Manager –
Power
ICF

The answer to this question may not be as simple as it is dependent on a number of factors like Battery Energy Storage Systems (BESS) prices, cost of solar generation, firming-up ratio for Solar, type of coal plant being competed against, feedback response on global coal prices due to reduced demand, coal sector deregulation and environmental considerations. All these issues are quite tricky and difficult to make appropriate judgement. A scenario-based approach might be able to provide us some useful insights.

Globally, the power systems are benefitting from falling storage prices making BESS solutions viable for providing short-duration grid services (primarily ancillary services). Further, recent SECI tenders (for firm peak power supply for 6 hours pre-defined period in a day) have also indicated that storage is becoming increasingly competitive (on energy side as well) with respect to conventional generation capacities. The average peak power tariff quoted by winning bidders (with chemical storage) was INR 6.85/kWh.

These trends are expected to get stronger in the coming years as BESS prices are expected to fall further. Most of the publicly available forecasts (like Lazard, IFC and BNEF) indicate rapid drop in Battery costs (esp. of Li-ion) in the next five years. BloombergNEF (BNEF) forecasts battery costs in U.S. to fall from 176 USD/kWh to 94 USD/kWh (2019 to 2024 period). ICF’s internal analysis indicates that the cost decline is expected to be driven by a number of factors like growing market for consumer electronics, demand for electric vehicles, improvement in manufacturing processes, economies of scale (GW factories), lower cost of associated components, and advancements in electrolyte technology.

Many big utilities in the U.S. (like PacificCorp and NextEra Energy) are realizing benefits of ‘early coal retirements’ and promoting use of Renewables with Storage to meet the demand. 

Currently, the situation in India is slightly different where domestic coal prices continue to be highly regulated and substantially lower than market prices. Coal India Limited (CIL) which supplies nearly 90% of coal to power sector continues to enjoy endless subsidies (direct and indirect) from the Government. This has led to CIL keeping prices low despite increasing costs (direct and indirect) of extraction. 

However, for India it’s just a matter of time as domestic coal prices continue to increase. A scenario analysis (shown in the graph below) indicates that solar plus BESS will be able to replace coal plants  based on regulated prices (for reliable base-load operations) anywhere between 2040 to 2045 and will be able to beat coal plants based on imported coal prices or de-regulated coal (if current price levels of international coal were to be maintained) between 2030 to 2035. 

Figure 1: LCOE (Total cost) comparison between Coal and ‘Solar + Storage’ (source: ICF analysis)

The graph above shows LCOE (Levelized Cost of Energy) range of ‘Solar + Battery’ for various levels of ‘firmness’ (from 0% to 60%). Firmness level of 0% represents a solar plant with ‘zero battery capacity’ tied to it, while firmness level of 60% represents a ‘Solar + Battery’ plant with battery size which can store 60% of total daily solar generation (and re-supply when required within 24 hours). For 1 MW solar plant with average daily PLF of 20%, a battery size of ~3.54 MWh represents firmness level of 60%.

Acceleration of environmental related costs and installation of other emission controls on coal generation supply chain will only hasten the path towards cost parity between coal and solar+BESS.”

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