6 key highlights from the new ESS framework

The Ministry of Power has released a detailed framework to reshape the nation’s energy sector, to boost energy storage systems (ESS).

The blueprint includes measures like financial incentives and regulatory revisions to foster ESS. The guidelines also provide a risk-sharing framework for stakeholders involved in energy storage procurement.

Here are the six key highlights from the framework:

1. VGF and Green funds:
One of the most significant proposals within the framework is the introduction of the Viability Gap Funding (VGP). The VGP is aimed at supporting battery energy storage systems (BESS) projects by reducing the levelized cost of storage. The VGF could be up to 40% of the project’s capital cost, with the project commissioned within 18-24 months. This would make BESS a viable option for peak power management and reduce costs for large-scale capacity expansion.

The government can accelerate the establishment of the ESS industry through Concessional Green Finance, sovereign Green Bonds, and long-term loans from financial institutions like PFC, REC, and IREDA, according to the framework.

2. Green jobs:
India’s energy demand surge and shift towards renewable energy sources present opportunities for emerging ESS technologies.

Domestic innovation and manufacturing can stimulate job creation, economic growth, and position India as a global leader in sustainable and low-carbon energy systems.

A Saur Energy report estimates that rapid transition to clean energy could create 1.5 crore new jobs by 2025 from the business as usual scenario.

3. Collaboration and GTM:
Investing in R&D of ESS technologies can enhance efficiency and make them cost-effective for commercial use. Collaboration between academia and industry, a nodal agency, and training institutes can help address the need for long-term research and development.

The Central government plans to allow energy storage systems (ESS) developers and agencies to offer various market-based products, including spot energy markets, capacity markets, and storage. The government also plans to introduce rules for Time of Day Tariff to incentivize ESS adoption. The government may create a PLI Scheme for ESS, issue an approved list of models and manufacturers, and establish a pilot scheme for demonstration projects. Assistance from the Power System Development Fund may be provided for two pilot ESS projects.

4. Energy security:
The Indian Ministry of Power has released guidelines to promote the growth of Pumped Storage Projects (PSPs) and enhance energy security. The guidelines include transparent site selection criteria, self-identification of off-river sites, market reforms, concessionary government land, exemption from free power obligations, rationalization of environmental clearances, and depleted use of mines.

For example, for projects up to 200 MW and for projects over 200 MW, the Central Government is offering budgetary support, including PSPs up to Rs 1.5 crore/MW and up to Rs 1 crore/MW.

5. Storage:
To encourage the best development, the Central Government is promoting a variety of established and developing Energy Storage (ESS) technologies.

To assist utilities, purchasers, and developers in creating ESS projects for the Indian power sector that are both economically feasible and environmentally sustainable, they may announce technology-agnostic bidding guidelines for LDES, SDES, and ancillary services. Both per megawatt hour and composite tariffs may be used in the bidding process.

In addition to facilitating connectivity to intra-state transmission and distribution systems, the Central Electricity Authority and Central Transmission Utility may give priority to connecting Energy Storage Systems (ESS) to the closest Inter State Transmission (ISTS).

6. Circular economy:
To move from a linear to a circular economy, the end-of-life management plan for end-of-life, ESS projects can be included in the bid documents.

By collaborating with businesses that specialize in recycling used batteries, manufacturers can encourage battery reuse and reduce waste. E-waste collection can be facilitated by specialized waste management facilities, and producers now have extended producer responsibility due to the Battery Waste Management Rules, 2022.

Standard operating procedures and a mechanism for reusing ESS parts can be established. It is possible to address environmental issues and guarantee regulatory compliance. Mines that have been abandoned can be converted to hydro storage facilities for PSP development.