Surge in Renewable Energy Output Marks India’s Shift to Green Power
Government pushes battery storage to manage intermittency and optimize coal usage
India’s renewable energy share in electricity generation soared to 17% in May and reached 19% in early June, marking a notable jump from 13% and 14% respectively during the same periods last year, according to a recent HSBC report. This rise reflects the combined impact of reduced power demand and consistent renewable capacity expansion over the past year.
Declining Demand Driven by Rainfall and Seasonal Effects
The country witnessed a 4% drop in overall power demand and a 7% reduction in peak demand during May.
- For early June, both metrics dropped by 1%, driven primarily by excessive rainfall, which was significantly above average.
- The lower demand forced thermal plants to reduce output, bringing the plant load factor (PLF) down to 65%, compared to 72% last year.
Renewable Energy’s Must-Run Status and Market Impacts
India’s policy of granting a must-run status to renewable sources ensured they remained operational, causing:
- A build-up in coal stocks to 61 million tonnes, covering 21 days of demand—up from 17 days last year.
- Wholesale power prices during solar hours fell to zero on May 25, reflecting the oversupply during peak generation periods.
- The power deficit remained virtually negligible throughout May.
Battery Storage Emerges as Government’s Strategic Focus
To tackle intermittency and maximize renewable utilization, the government has intensified focus on battery energy storage systems (BESS):
- It has announced an additional Rs 54 billion in viability gap funding (VGF) to support 30 GWh of battery storage.
- This equates to $21/kWh in government incentives, with 25 GWh reserved for states and 5 GWh for NTPC.
- This supplements the existing Rs 37 billion VGF, under which 13 GWh of capacity is already in progress.
Policy Boost for Battery and Pumped Storage Projects
To further ease integration and encourage new storage developments, the government:
- Extended the waiver on Inter-State Transmission System (ISTS) charges for pumped storage plants (PSPs) and co-located BESS projects, as long as they are awarded or commissioned by June 2028.
- This measure has already had an impact, with nearly 10 GWh of BESS tenders awarded since March 2024.
This policy pivot signals India’s determination to not only ramp up green energy adoption but also to modernize its energy infrastructure to ensure stability and sustainability in the long run.
