What Role Can Energy Storage Systems Play in South Asian Power Systems?

While wind and solar are now the cheapest cost forms of electrical energy, they do not provide firm capacity due to their intermittent nature. As countries around the world increasingly adopt these low cost forms of Variable Renewable Energy (VRE), they are turning to Energy Storage Systems (ESS), especially Batteries (BESS) to meet their firm power requirements.

In the past, there was concerns that BESS was a “nascent” or “emerging” technology. But with 42 GW of installations in 2023 globally, BESS is being much more widely deployed than hydropower (14 GW in 2023) and nuclear (7 GW in 2023). In 2024, BESS is expected to surpass coal and gas to become the most widely installed source of new firm capacity. However, South Asia has ben severely lagging when it comes to BESS installations. For example, despite demanding 7% of the world’s electricity, India has installed ~0.1% of the utility-scale BESS systems.

This article explores how South Asia can deploy BESS to lower costs and improve reliability in the region.

What is the role of storage?

One of the major confusions I often hear is that energy storage is “expensive”, as people compare the Levelized Cost of Storage (LCOS) to the cost of intermittent solar and wind. As discussed above, storage is a capacity resource and in fact provides negative energy. The role of storage is to provide firm peaking capacity and power at times of low VRE output. Figure 1 illustrates how Energy Storage is used in California.

The above load profile for California shows BESS as a capacity resource. It actually producing negative energy (charging from excess solar during the day), but from 18:55 to 21:00 (just over 2 hours), BESS is the largest source of firm capacity for California. BESS peaks at 6.2 GW at 19:35, a higher contribution than natural gas at 4.9 GW. This profile is taken from this spring; with more GW being installed every year, next year’s peak contribution from BESS will be even higher.

It is also crucial to observe what it is not doing. Nuclear (the flat pink bar near the bottom) is providing a flat “baseload” profile. Like coal, this baseload power is not useful for a system with lots of solar and wind. During the day when there is surplus solar (or periods of high wind, such as monsoon in India), nuclear and coal are extremely expensive to turn down and off. For example, CEA estimated that a 500 MW coal unit has a cold start cost of ~175 Lakh. This is Rs 35/kW for a cold start. In other words, a coal plant costs Rs 5/kWh just to not be used for 7 (solar) hours during the day. In contrast, ESS is flexible enough to absorb surplus RE during the day and ramp quickly to meet evening peaks.

In summary, a system operated with VRE + BESS will operate very differently than one reliant on baseload coal/nuclear with natural gas/hydro “peakers”. VRE will provide the vast majority of the energy, while the BESS provides the firm capacity, filling in the gaps in VRE, ramping up to meet net peaks and ramping down during times of surplus.

So Is Energy Storage Expensive?

Because ESS is a capacity/firming resource not an energy source, comparing the “LCOS” is a particularly poor metric. This is why we must evaluate the cost of ESS vs. other firm resources such as natural gas, nuclear or coal. In India, the primary form of firm energy is coal (~75% of energy), so we need to compare the cost of capacity from storage vs. the cost of capacity from coal. Figure 2 shows a comparison for Uttar Pradesh (UPPCL). This is the fixed (ie. Capacity) cost of coal only.

As shown in Figure 2, ESS is 30-40% the cost of new thermal power; a substantial savings to utilities. As discussed above, ESS does not provide energy, so we must compare it to the FC only of coal, not the FC + VC. The VC of coal can be compared to the energy-only cost of wind and solar.

While Figure 2 compares the cost of ESS vs. thermal in Uttar Pradesh, the world’s largest sub-region, similar results would hold for other jurisdictions. Another way to compare the cost of storage to alternative resources is to combine it with wind and solar for a “blended” cost. In Nepal for example, there is abundant hydropower which has a very high fixed cost but very low variable cost. Figure 3 compares the “blended” cost of recently built thermal in Maharashtra vs the cost of a combined wind, solar and storage. Note the wind, solar + storage is modeled using a 90% reliability, higher than coal which has 85% reliability.

It is crucial to note that the combination of wind + solar + storage is cheaper even than “mine-mouth” coal plants such as Lara in Chhattisgarh. Furthermore, the cost of wind, solar and storage continues to decline while thermal costs escalate year after year. If we compare on an “apples-to-apples” basis for the same level of reliability, energy storage is substantially cheaper than new coal.

What Duration of Storage is Required to Provide Comparable Reliability to Coal?

One of the biggest concerns often heard in South Asia is that energy storage is not truly “as reliable” as coal power, unless we built 24+ hours, which is very expensive (today). And it is true that to have a grid run on 100% VRE, longer duration storage will be required, as shown in Figure 4:

In the California example above, most storage is 2 or 4 hour. In market-based systems like Texas and Netherlands, 2-hour storage is the most common. Another approach is for regulators to assign credit based on an “ELCC” calculation (Effective Load Carrying Capability). While the technical details are outside the scope of this article, this involves a 15-minute (or hourly) model to identify how many MW of load a given “firm” source (coal, gas, 2-hour storage, 6-hour storage, etc.) can meet.

In CEA’s recent discussion paper on capacity credit for generation resources?6-hour storage was actually calculated to have higher reliability than thermal, with 4-hour comparable (add link). This is consistent with Chile which also identified 4-hour storage as comparable reliability to thermal. Each jurisdiction should do their own calculation; areas with higher VRE and lower flexible resources (like reservoir hydro) will need longer-duration storage and vice-versa.

But given the levels of VRE penetration in South Asia (11% in India, 1% in Bangladesh vs. 26% in California and 32% in Chile), 4 hour storage is more than enough for the pre-2040 timeframe. And as shown above in Figure 2, even 6 hour storage is still substantially cheaper than new coal.

Conclusion

Energy storage has many use cases, such as blackstart, energy arbitrage, ancillary services, and transmission/distribution upgrade deferral. In many cases, due to its flexibility and fast response time, these services can be “value stacked”. However, the most valuable use case for ESS is as firm capacity-displacing the need for costly new thermal generation. It is crucial for regulators to recognize this capacity value either through formal capacity markets (like in PJM or IESO) or by implementing least-cost resource adequacy planning.

On top of the cost savings, energy storage has much greater reliability in that it can be built modularly and on the demand side (to reduce distribution-related outages, vs. centralized thermal/hydro plants). The response time is much faster (in milliseconds vs. minutes for coal), meaning greater frequency control (and therefore less need for stabilizers and better power quality for industrial users). BESS has a much higher uptime (>98%) vs. thermal power (~85%) and can be built in 3 months vs. 5+ years for thermal power. This is particularly relevant for energy-hungry countries in South Asia, which have experienced supply shortages due to excessive reliance on fossil fuels and need new firm supply urgently. Finally, energy storage can promote energy security. Even if 100% imported, solar + storage provides 16x the amount of energy [AH3]?per dollar of imports as imported coal. India for example spends $44 Billion per year on imported coal while fossil fuel imports account for nearly 5% of India’s GDP

By leveraging ESS as a capacity resource, South Asian countries can substantially reduce power costs, improve reliability and ensure energy security. Contrary to the myth of the development vs. environment “trade-off”, ESS (powered by wind and solar) is a win for both the environment and South Asia’s development.