What are the main opportunities for BESS in India’s renewable space?
Best way to get hang of opportunities associated with BESS to be applicable in RE space is through segmentation of market by application and size of users
Undoubtedly the best way to get the sense of opportunities associated with battery energy storage systems with renewable is to segment the market by the application and size of users. Typically, there would be three segments under BESS applications:
• Front-of-the meter (FTM) utility scale installations > 10 MWh
• Behind-the-meter (BTM) commercial & industrial (C&I) installations >30 kWh < 10MWh
• BTM Residential < 30kWh
For India, the market penetration is seen to be kicked-off in the FTM segment in line with global trend. The utility scale BESS is expected to grow at a rate close to 30% till 2030 which is fastest for all the three segments. It is estimated that for utility scale installations BESS systems globally would be in range of 450 GWh to 620 GWh in annual capacities by 2030. Close to 10%-15% is anticipated to be India’s share which means India could see FTM utility-scale installation of 50 GWh to 70 GWh which could potentially account for 90% of the market share.
Mr. Ravi Shekhar, Director & Head,
of Eninrac Consulting says “Front of the meter (FTM) applications for utility scale BESS systems in India would be key driver to push the business case. Close 80%-90% of the market share of the total BESS market size shall be driven by this market segment. Many utilities shall invest towards increase energy providers’ flexibility—for instance, through firm frequency response. In the long run, BESS growth will stem more from the build-out of solar parks and wind farms, which will need batteries to handle their short-duration storage needs.
Also, the revenue models for FTM-utility scale BESS shall depend upon heavily on the regional level and how does a market players wishes to proceed for the segment. Revenue models for FTM utility-scale BESS depend heavily on the dynamics of the regions that providers are entering. Most utility-scale BESS players pursue a strategy of revenue stacking or assembling revenues from a variety of sources. They might participate in ancillary services, arbitrage, and capacity auctions. The BESS players that have gotten traction in the FTM utility segment have understood the value of responding individually to countries and their regulations versus using one monolithic strategy across the globe even if we analyze the growth markets as of now for UK, Germany & Italy etc.”
Where is the value for C&I segment for BESS in India?
C&I segment globally is anticipated to be the second largest market segment for BESS applications across the globe and in India as well the trend shall be no different either. The C&I segment is anticipated to reach 52 GWh – 70 GWh (McKinsey BESS Model) and of this around 10%-15% is anticipated to be the share of India. Hence India would be attracting around 5 GWh – 7 GWh market size for BESS by 2030 for C&I segment. Further the C&I segment has four sub-segments which shall drive the growth. First one being the EV charging infrastructure (EVCI). EVs are likely to grow from 25%-30% in current global market share to 45% by 2030 in all vehicles sales.
India too would see decent penetration of EVs in the country by 2030 which shall drive the need for rapid expansion in EVCI which may lead extra pressure on the grid infrastructure and hence off-grid solutions such as BESS would be apt to be adapted. More and more partnerships shall be formed BESS players and EV manufactures to scale up more EVCI inclusive of remote locations. The next subsegment of C&I segment would be critical infrastructure such as telecom towers, data centers & hospitals. For uninterrupted better quality of power supply with less polluting alternative BESS shall be employed at wider scale in the country as well.
The third subsegment is public infrastructure, commercial buildings, and factories. This subsegment will mostly use energy storage systems to help with peak shaving, integration with on-site renewables, self-consumption optimization, backup applications, and the provision of grid services. We believe BESS has the potential to reduce energy costs in these areas by up to 80 percent. The argument for BESS is especially strong in places such as Germany, North America, and the United Kingdom, where demand charges are often applied. India too will have an ecosystem which shall support the absorption of BESS in the segment. The final C&I subsegment consists of harsh environments—applications for mining, construction, oil and gas exploration, and events such as outdoor festivals.
The source of the growth will be customers moving away from diesel or gas generators in favor of low-emission solutions such as BESS and hybrid generators. But this transition will be slow in India and shall mainly be driven by the cost parameter for BESS. Once the cost is brought down these segment shall also be adapting BESS gradually as it becomes more and more competitive with respect to DG sets.
What should be strategic positioning value chain players in BESS market of India?
In a new market like this, it’s important to have a sense of the potential revenues and margins associated with the different products and services. The BESS value chain starts with manufacturers of storage components, including battery cells and packs, and of the inverters, housing, and other essential components in the balance of system. The BESS systems providers are anticipated to receive only 50% of the of the BESS market profit pool. Then there are the system integration activities, including the overall design and development of energy management systems and other software to make BESS more flexible and useful. We expect these integrators to get another 25% to 30% of the available profit pool.
Finally, between 10% -20% of the profit pool is associated with sales entities, project development organizations, other customer acquisition activities, and commissioning. Therefore, for the market participants it would be ideal to become a battery system manufacturer as the profit pool for them is maximum followed by system integrators who are in mid-range of 25%-30%.
- Communications Team