Credit rating agency Crisil in its latest report has said that tailwinds from government grants in the form of viability gap funding (VGF) for battery storage systems and other favourable policy announcements should lead to around 4 gigawatt (GW) of battery storage capacity by fiscal 2028. It said another driver will be the improvement in return on capital (returns) profile of standalone storage projects by 300-400 basis points (bps) to 12-13%, bumped up by grants and an on-year fall of around 20% in battery prices.
According to the report, driven by government thrust and strong investor interest, renewable capacity (solar and wind) has grown to around 120 GW as of December 2023 from around 70 GW as of December 2019. By fiscal 2028, the capacity is expected to touch 220 GW, leading to an increase in the proportion of renewable energy in overall power mix to over 20% compared with 11% now. As renewable generation is intermittent, this may increase the risk of imbalance in the power grid if not absorbed suitably through storage.
The report further said battery storage is a key technology envisaged for storing renewable power and matching it with demand, thereby supporting stability of the power grid. Till now, battery storage capex in the country was low primarily because of high cost of batteries, which results in unattractive returns for the developers. To address this issue, the government has announced steps such as the VGF scheme under which it will provide financial support of up to Rs 3,760 crore to 4 GW-hour of battery projects.
