As India accelerates its renewable energy transition, concerns around grid stability, transmission bottlenecks, battery storage viability and rising electricity demand are moving to the centre of policy and industry discussions. From renewable curtailment in states such as Rajasthan to the rapid scaling of battery storage projects and increasing pressure from EVs, AI-driven data centres and industrial demand, the country’s energy infrastructure is entering a far more complex phase of growth. In an interaction with BW Businessworld, Debmalya Sen speaks about whether India is truly entering the commercial era of energy storage, the risks around transmission capacity, concerns over unsustainable battery pricing, rooftop solar policy uncertainty and whether the current grid infrastructure is prepared for the next phase of energy demand.
Gujarat recently pushed large-scale battery storage deployment for grid stability. Do you think India is finally entering the real commercial phase of energy storage, or is the sector still policy-led?
The sector is still policy-led. But at the same time it is gearing up to grow. Gujarat is commissioning 360 MW, and as of today in India we have around 6 GW of commissioned capacity. We expect another 4–5 GW to get commissioned by the end of the year, taking the total capacity to around 8–10 GW. So yes, while it is still policy-led, we are expecting the sector to grow rapidly from here.
The Prime Minister recently advised people to work from home given the fuel crisis. How is this announcement likely to impact the energy sector?
Right now, it is not a directive, it is an advisory given by the Prime Minister. Of course, emergency services and critical sectors will continue to function, similar to what happened during Covid. There will always be areas where work cannot be affected. At the same time, the Prime Minister also advised further proliferation of electric vehicles in the country, which is a positive step. We expect EV demand to grow in the coming days because of this.
Several industry players have raised concerns about grid congestion, renewable power curtailment and transmission bottlenecks becoming the biggest hidden risk for India’s renewable transition.
It is not a hidden risk, it is a known risk today. If at all there is one factor that can derail India’s energy transition, it is transmission. While transmission infrastructure is being developed, the question is whether it is happening at the same pace at which renewables are coming to the grid. In Rajasthan especially, we are already seeing a lot of renewable curtailment. Just two weeks ago there was news that nearly 8 GW of renewable capacity had been curtailed in the state. These issues are relatively small today, but they will only increase in the coming days. Transmission will become a bottleneck.
At the same time, this creates an opportunity for batteries as transmission assets. Whenever the transmission network becomes overloaded, instead of curtailing wind or solar power, the excess load can be shifted to batteries. Later, during evening hours when demand is high and renewable generation is low, that stored energy can be released back into the system.
India continues to add renewable capacity aggressively, but coal still remains dominant in power generation. Is the transition happening slower than the public narrative suggests?
As I said earlier, it is not happening slower. There is a plan in place, but due to right-of-way issues and other implementation challenges, execution sometimes gets delayed. Grid expansion has been happening steadily over the last 10–15 years. However, renewable energy additions are now taking place at a completely different scale. Whether the transmission network can keep pace with this level of renewable expansion is the key issue that remains to be seen.
There is increasing debate around new net metering rules and additional charges on rooftop solar users. Can policy uncertainty slow rooftop solar adoption?
Policy uncertainty can slow down everything. But rooftop solar is clearly becoming an area of attention for both the central government and several state governments. That gives confidence that rooftop solar adoption will eventually scale up in a significant way.
Battery storage bids in India have become extremely competitive, but there are still concerns around project viability and bankability. Is the industry entering an unsustainable pricing cycle?
The industry has already entered an unsustainable pricing cycle. The VGF-1 and VGF-2 viability gap funding schemes have already been exhausted. Around 43 GW has been tendered under these schemes. Most of the competitive pricing that we are seeing today has emerged under the VGF framework.
At the same time, the world is witnessing a sharp rise in battery and metal costs. For example, lithium carbonate prices have increased by nearly 135 per cent over the last six months. Battery cell costs, which were around $35 per kilowatt-hour last year around August, have now risen to nearly $55–60 per kilowatt-hour. This increase in costs is pushing many awarded projects into a risk zone. Questions are now being raised about whether these projects are commercially viable and whether they will eventually see the light of day. Nearly 40 per cent of projects under the VGF scheme are currently under risk and may not see completion.
India is seeing rising electricity demand from electric vehicles, data centres and artificial intelligence. Is the country’s current grid infrastructure prepared for the next phase of demand growth?
At present, no. But expansion plans are in place. The larger question is the extent to which transmission infrastructure and generation capacity will need to expand in order to meet the next phase of demand growth. |
