Govt weighs $1 billion concessional loans for battery storage plans

In an effort to boost India’s battery storage plans, the government is exploring a nearly $1 billion concessional loan facility to be drawn from multilateral lenders such as the World Bank, Asian Development Bank (ADB), European Investment Bank, New Development Bank (NDB) and the Asian Infrastructure Investment Bank.

According to information reviewed by Mint, while about $400 million of this corpus is being explored for making electricity transmission and distribution-level investments in battery storage, another $250 million may be earmarked for making battery storage investments to support wheeling of electricity from green energy sources such as solar and wind across the national grid.

In addition, an additional $335 million may be allocated to offer concessional financing to catalyse investment into the battery market in India. The programme is helmed by the government’s policy think tank NITI Aayog and looks to accomplish what Tesla has done at its Gigafactory in Nevada, US.

“The plan is to expedite India’s battery storage revolution. Concessional loans help create such an ecosystem as has been seen in the US, Europe and countries such as France, Germany, China, South Korea, Hungary, Belgium and Estonia,” said a person aware of the plan requesting anonymity.

This assumes importance given India’s ambitious clean energy targets and the intermittent nature of electricity from clean energy sources such as solar and wind. With the newly elected Narendra Modi government articulating its vision for reliable and uninterrupted power supply to households in its second term, storage holds the key for providing on-demand electricity from wind and solar projects.

The loan facility is part of India’s plan to build at least four Tesla-style giga factories of 10-gigawatt hours (GWh) each to manufacture batteries with an investment of around $4 billion as reported by Mint on Friday. To put this into perspective, each GWh (1,000-megawatt hour) of battery capacity is sufficient to power 1 million homes for an hour and around 30,000 electric cars.

The union government is also exploring extending soft loans to state power distribution companies (discoms) to deploy energy storage and battery solutions and create an utility scale market for the same. In addition, it also plans to incentivize rooftop solar with battery backup and create self-sufficient micro-grids for telecom towers and for backup applications. The plan also involves using storage batteries for maintaining spinning reserves that can support electricity demand in the country in the event of power plants going offline by providing compensatory quantum of electricity to be injected into the system.

The government has studied steps taken by other developed economies to secure their energy needs—a case in point being the US state of Nevada, which gave 20 years of sales tax abatement worth around $725 million, 10 years of property and business-tax abatement around $332 million and $195 million in transferable tax credits to Tesla.

While the US government provided a research and development (R&D) capital support of $2.4 billion of grants for battery manufacturing under American Recovery and Reinvestment Act (ARRA) in 2009, it also included a $1.5 billion in grant to develop a domestic battery supply chain. States such as South Carolina, Georgia and Michigan have also given tax breaks for setting up battery manufacturing.

Also, Europe has been at the forefront of promoting battery manufacturing with the European Union Battery Alliance planning to invest €6 billion in battery manufacturing with €1.2 billion in public subsidies with the goal of opening production sites in France and Germany. There is also concessional finance with funds from European fund for strategic investments (EFSI) set up by European Investment Bank (EIB) for setting up such giga scale factories. In addition, there has been a euro 4.5 billion lending for projects linked to battery technology development and deployment form since 2010.