The share of round the clock (RTC) plants¹ in the overall renewable (RE) capacity mix will increase from nearly nil today to over 5% by calendar 2025. This will be driven by expected tariff reduction of nearly 12% over the next two fiscals and an ability to provide power at a pre-determined schedule — currently a challenge for RE projects. Both aspects will make RTC popular with state power distribution companies (discoms).

Government initiatives and strong investor interest have led to multi-fold growth in RE capacity (solar and wind) in the past five years from 45 GW as of December 2016 to around 100 GW as of December 2021. The heady growth, however, has brought to the fore the issue of grid stability for discoms, given the difficulty in scheduling of RE power generation vis-à-vis other sources².

For instance, solar power production takes place during day time and does not match peak requirement of discoms, which is typically in the evening. Also, wind and solar generation show a degree of seasonality and are not available uniformly throughout the year — wind PLFs increase during monsoons, while solar PLFs go down.

RTC generation plants help address this issue by storing excess power produced by solar plants during the day and by wind plants at night in an on-site battery or alternate storage solution³. The stored power is discharged into transmission grid later when demand arises, or as per schedule, thus matching demand and production times.

Despite the benefits, RTC capacities have found less success so far, with only around 1 GW successfully bid out. One of the reasons is higher tariffs compared with other RE bids, as these typically combine storage along with the project.

Says Manish Gupta, Senior Director, CRISIL Ratings, “We expect a reduction in RTC tariffs over the next two fiscals, from a levelised tariff of Rs 3.7⁴ per unit to Rs 3.2 per unit. This will be due to lower cost of storage equipment, which currently contributes nearly 25% of the tariff. Prices of lithium-ion based battery storage solutions, the dominant form of storage, have fallen from $250 per kilowatt hour (kWh) in 2018 to $180-200 per kWh today, and are likely to drop to ~$150 per kWh over the next two fiscals.”

This reduction of storage system cost will ride on economies of scale, improvement in efficiency, falling prices of electrolytes (which form around one-fourth of overall cost), and recycling of component metals such as nickel, cobalt, and lithium. Additionally, alternative compositions and chemistries in battery pack are now becoming available, which allows substitution of certain metals and is thus likely to shield against the rise in prices of select metals.

While lower cost is one aspect, Says Ankit Hakhu, Director, CRISIL Ratings, “As India marches towards its goal of 500 GW of RE power by 2030, and the share of RE generation in the overall mix continues to grow, the issue of grid stability will only intensify from here. Over next four years, RE capacity will be around 25% of the generation mix - sizeable enough to materially destabilise the grid or get curtailed, if not scheduled properly. Thus, we expect RTC plants, which have the ability to schedule power at pre-determined timelines, to gain traction. We expect RTC to be forming atleast 5% of the overall RE mix by 2025 from almost nil today.”

The estimates are sensitive to pricing of components of battery equipment. Further, any duties that may be levied — given that most of the storage components are imported, - and dynamic global macro conditions can impact the estimates.

¹ which by definition are to provide generation at 80% of the rated power capacity at a pre-determined schedule
² Such as thermal power generation, hydro power, and nuclear power among others
³ Such as pumped hydro, hydrogen fuel cells, etc.
⁴ Levelised tariff discovered in last RTC bid in CY 2020