Big push for energy transition likely in Budget 2023

Transitioning to clean energy from fossil fuels is crucial for limiting global warming. Photo: AFP
Transitioning to clean energy from fossil fuels is crucial for limiting global warming. Photo: AFP


FM Nirmala Sitharaman may announce a slew of initiatives in different sectors.

Finance minister Nirmala Sitharaman may unveil a range of initiatives to support India’s energy transition in the Union budget, including a 21,650 crore scheme to encourage the setting up of grid-scale battery energy storage systems (BESS), 3,765 crore in viability grants for such projects, and reduced import duties on parts to build BESS, two people aware of the development said.

Sitharaman is also expected to announce an additional 10,000 crore outlay for states to acquire 26% equity stakes in 14 hydropower projects totalling 13.25 gigawatts (GW) in Jammu and Kashmir, northeastern and hilly states. Furthermore, the government may offer a 5% interest subvention for new energy-efficient technologies and a credit guarantee of 75% of the loan amount or 15 crore per project to small and medium enterprises deploying energy-efficient technologies.

“The equity support for hydropower projects can result in a capital expenditure of 1.3 trillion and help in creating jobs in these states and help with revenue generation for their economy," one of the two people cited above said, seeking anonymity.

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Transitioning to clean energy from fossil fuels is crucial for limiting global warming. Warming of the planet is already causing more frequent and intense heatwaves, droughts, and storms, as well as rising sea levels and flooding. By helping limit global warming, India can help to mitigate the dangers associated with climate change.

Energy storage is expected to play a key role in helping India meet its commitment to net-zero carbon emissions by 2070, increasing non-fossil energy capacity to 500GW by 2030 and reducing the carbon intensity of its economy by 45% from the 2005 level.

Queries emailed to the spokespeople for the ministries of power and finance on 19 December remained unanswered till press time.

Equity support for hydropower projects in northeastern and other mountainous states aims to facilitate the establishment of these projects, as many of them lack the resources to contribute their equity share for these capital-intensive projects. The total hydropower generation potential of India’s northeastern states and Bhutan is approximately 58 GW.

A 27 October Mint report said India’s first sovereign green bond might be utilized to fund clean energy initiatives, including viability gap funding for battery storage, energy efficiency schemes for small and medium businesses, and equity support for hydropower projects in the northeastern states. On 13 December, Mint reported that the budget is expected to include a production-linked incentive (PLI) scheme for battery storage and a pumped storage plant policy for hydropower.

A PLI scheme for advanced chemistry cell batteries has already been launched, with the shortlisted firms focusing on batteries for electric vehicles. The new PLI scheme for BESS is targeted at grid-scale or utility-scale battery storage.

Large battery storages can store electricity generated from solar or wind projects as chemical energy and reconvert it to electricity to maintain grid stability, given the intermittent nature of clean energy. Large batteries are typically used to store inexpensive green power during off-peak hours, which can be released for consumption during increased power demand.

“Given that the manufacturing capacity for grid-scale BESS will only come up by 2025, there is a need to incentivize such manufacturing in the interim period for which the VGF is being looked at," the first person cited above said.

In addition, the viability gap funding by the government can support India’s infrastructure creation plans through public-private partnerships, with the electricity storage business expected to be a vital part of the energy transition. “The growing share of renewables in the energy mix is expected to lead to a healthy demand for energy storage projects to manage the grid stability. Pumped hydro and battery storage are emerging as the major sources for energy storage projects," said Vikram V., vice-president and sector head of corporate ratings, ICRA.

The improvement in cost economics remains key to greater adoption of the storage projects and within these two sources, execution risks remain relatively higher for pumped hydro projects, he said.

“With the focus on renewable energy, India will require 15-20GW of energy storage and there is opportunity in both battery storage and pumped storage spaces," said Hetal Gandhi, director-research at Crisil, adding that the pumped hydro plants would be commissioned by FY27 and before that, battery storage would have to store the power.

The country’s power requirement will be 817GW by 2030, more than half of which will be from clean energy, according to India’s apex power sector planning body Central Electricity Authority (CEA). India also requires 27GW of battery storage by 2030, with four hours of storage and 10GW of hydro-pumped storage plants, according to CEA.

The government also plans to call bids for setting up around 4 gigawatt-hour (GWh) of grid-scale battery storage systems at the regional load dispatch centres. The government also plans to set up a 14 GWh grid-scale battery storage system at the world’s largest renewable energy park at Khavda in Gujarat and invite bids for the largest global tender for setting up a 13GWh grid-scale battery storage system in Ladakh.

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