India is deeply committed to its transition away from traditional fossil fuels and building its non fossil fuel capacity to at least 500 GW by 2030. The country’s cumulative renewable energy capacity totals to 209.4 GW as of December 2024, with solar energy contributing 47% of the capacity, followed by wind energy (23%) & Large hydro Projects (22%), and the rest being generated through Bio Power (5%) and Small hydro projects (3%).
The rapid expansion of renewable energy capacity will drive higher penetration of renewables into the power grid, which may lead to grid stability challenges. At 20% penetration, grid stability becomes more difficult to maintain, while at 30%, instability becomes a significant concern. Coupled with the intermittent generation patterns of solar and wind energy, this poses a critical challenge for the Indian government in achieving its 2070 net-zero emissions target.
Energy storage systems (ESS) play a crucial role in smoothening out this intermittency and enabling a continuous supply of energy when needed. Thus, for sustainable renewable energy growth, a concurrent growth of ESS capacity is imperative. In line with this, the recent statement by Mr. Prashant Singh, Secretary of the Ministry of New and Renewable Energy, indicates that the government may mandate 10% battery storage for new renewable energy projects, which is expected to further accelerate growth in the ESS sector.
Energy Storage Systems
Energy Storage Systems (ESS) are designed to store surplus energy generated from renewable sources, which can be deployed during periods of peak demand. ESS are crucial for stabilizing the grid by reducing fluctuations in renewable energy generation. They store energy for use during peak demand, support grid stability, and enable greater renewable energy integration. ESS also help reduce peak energy costs, lower carbon emissions, defer infrastructure investments, and enable energy trading, contributing to a more efficient and sustainable energy system.
Battery-based Energy Storage Systems (BESS) and Pumped Hydro Storage (PHS) are the most widely used and commercially viable storage solutions. While other technologies exist, BESS and PHS dominate the market and are expected to complement each other, each playing a key role in supporting renewable energy growth and enhancing grid stability.
Growth Potential
The Ministry of New and Renewable Energy (MNRE) has prescribed state wise Renewable Purchase Obligations (RPOs) which mandate specified percentage of electricity to be sourced from Renewable Energy sources for Distribution Companies (DISCOMs). Similarly, Energy Storage Obligations (ESO) have been prescribed to secure grid stability, as the share of RE goes up.
Cost Analysis and Financing Parameters
Future trends and Investment Opportunity
