As a result, India's BES systems market is estimated to reach about USD 3 billion by end of 2024 and is projected to reach USD 5.3 billion by 2029 as per Mordor Intelligence. This translates to a CAGR of more than 11 percent.
BES can help provide solutions to core issues pertaining to the RE value chain, from its generation to consumption. From the perspective of front-of-the-meter (FTM) customers like RE developers and utilities, long duration BES systems can store intermittent RE when solar, wind, tidal energies are available. These BES systems can thus act as a compliment to the power banking facilities provided by transmission companies. This stored/banked power can be fully/partially released in the transmission grid when the time/price is appropriate.
For Behind-the-meter (BTM) stakeholders like commercial/industrial (C&I) players and residential consumers, BES can empower them by allowing them control over aspects like when to consume, where to consume and how much to consume. As a result, BES can reduce the frequent ramp-up/down of power output from conventional plants. This can increase the functional life of power infrastructure and optimize the overall costs associated with the electrical generation, transmission, and distribution systems. However, due to a combination of technological and financial issues, deployment of grid-scale BES systems has seen a cautious acceptance so far.
Manoeuvring the BES technology landscape
Based on parameters like lifecycle duration and cost-competitiveness, Lithium-ion Battery (LIB) based BES systems are currently widely accepted. However, they are being tweaked as the technology matures. To address some of its manufacturing issues, Lithium Iron Phosphate (LFP) technology is being developed aggressively. However, risks emanating from availability of constituent critical minerals persist, particularly with Lithium, as its supply is dominated by few countries. This has in some ways adversely impacted the pace of expansion of LIB projects. This may also affect the reverse supply chains of LIBs after the completion of useful life in existing BES projects.
Additionally, due to battery cell dysfunctionalities, suboptimal energy management systems, system induced operating errors, and harsh external conditions LIBs are prone to overheating. With this background, Sodium-ion (Na-ion) technology is emerging as a credible alternative. A McKinsey (McK) study states that Na-ion technology is considered more environmentally friendly, cost-effective, and less susceptible to thermal runaways. As this technology continues to improve, its shortcomings (lower cycle-life and energy densities vis-à-vis LIBs) are expected to be addressed. Flow-batteries and metal-air batteries are also expected to find acceptance in niche applications in the medium-long term.
Managing risks in BES projects
Creating tailor-made projects to fit the techno-commercial requirement of key customer segments is a pre-requisite for the success of any BES project. Creating solutions that help fill underserved demands in the market can help unlock a larger customer base resulting in better profit-margins. This can also lead to creation of USPs that help achieve favourable positioning in the customers’ mind space.
Experts predict that approx. 600 GWh of BES systems can get added globally by 2030 with more than 85% of it consumed by front-of-the-meter (FTM) customers like RE developers and utilities. During the years 2024-2030, FTM segment is expected grow at approx. 30%. For such specifications, multiple competing BES technology configurations are being developed. Thus, their meritocratic selection, and commercial scalability for diverse use-case scenarios like investment deferrals, price arbitrage and ancillary services entails significant due-diligence and risk taking on the part of the project developers.
This process is typically characterized by commitment of large capital. Hence, project developers have so far shown selective enthusiasm in committing to rapid deployment of BES. To reduce uncertainty on the return-on-investment for BES, the importance of aspects like system design, project level integration and its timely execution cannot be overemphasised. To address the real and perceived financing risk towards deploying clean energy, a comprehensive risk mitigation plan should also be created to support the project’s smooth commissioning and operations.
Prudent financial models to make BES bankable.
As per conventional models followed by energy companies, the costs of electricity charged to end-customers should be derived by factoring in the costs associated with BES projects. Additionally, it is important to pool in low-cost financing options for renewable energy projects consisting of BES. Cumulatively, this can result in minimizing the weighted average cost of capital (WACC) at the consumption side thus making BES more accessible to wider range of consumers and making it commercially viable.
Market driven project financing frameworks must be designed in a manner that it allows for timely repayment of the principal and interest components while generating reserves to mitigate possible project risks.
Here, multilateral agencies and financial institutions can carve out novel mechanisms targeted at emerging markets to support the infusion of BES in renewable energy projects. Such mechanisms can create multiplier effects on two fronts – (a) creating a ‘pull factor’ for substantially increasing the scale of funding (b) judicious capital allocation across sectors and geographic areas. Once such mechanisms can demonstrate consistent success, the paid-in/callable capital of multilateral agencies can be ramped up for supporting BES infused clean energy projects.
As per a joint report by IIM Ahmedabad and NTPC (NETRA), introduction of blended-financing, issuance of green bonds, outcome-based debt financing for supporting BES deployment can also be suitably explored. By aligning opportunities with the country’s startup ecosystems models around BES leasing, green credit swaps, BES -as-a-Service etc. can be explored to pool in finances from investors, corporates, and government agencies.
BES is considered as a ‘sunshine’ industry. Thus, it is important for technology, business, and policy stakeholders to forge a winning partnerships to help the global economy leapfrog into a ‘net-zero’ future.
Disclaimer: The copyright of this article belongs to the original author. Reposting this article is solely for the purpose of information dissemination and does not constitute any investment advice. If there is any infringement, please contact us immediately. We will make corrections or deletions as necessary. Thank you.
