Plummeting Battery Prices Fuel Expansion of Energy Storage Projects: Report

In a recent report by ICRA, it was highlighted that battery prices have dropped to their lowest in 2023 due to a decrease in raw material costs and increased production throughout the industry. This decline is set to propel the adoption of battery energy storage systems (BESS), crucial for managing the intermittency of wind and solar power sources.

ICRA projects that by FY2030, renewable energy, including large hydro, will constitute nearly 40% of India’s total electricity generation, up from the current share of less than 25%. The development of energy storage systems (ESS), primarily through BESS and pumped hydro storage projects (PSP), is essential to achieve this target.

The agency also noted improvements in grid stability and peak load shifting capabilities due to ESS. Following the Ministry of Power’s new bidding guidelines for BESS projects, various tenders have been issued, with fixed tariffs based on availability and efficiency.

Girishkumar Kadam, Senior Vice President & Group Head – Corporate Ratings at ICRA, commented on the recent trends: “The tariffs in recent BESS tenders have significantly dropped, from Rs. 10.84 lakh/MW/month in the initial 2022 tender to Rs. 4.49 lakh/MW/month in the latest 2024 tender in Gujarat. This reflects not only the falling battery prices but also the increasing competitiveness of BESS projects.”

He added that the average battery cost in 2023 was approximately USD 140/kWh, leading to a capital cost estimate of USD 220-230/kWh for BESS projects. Despite the decline, battery storage costs are still higher compared to PSP hydro, which costs about Rs. 5.0 per unit. However, BESS projects benefit from lower execution risks and shorter gestation periods, making them a favorable option for future energy storage solutions.

Overall, the sustained decrease in battery costs and their relatively quick deployment time are expected to enhance the adoption of BESS projects for energy storage needs moving forward.