The second session began with Dr YBK Reddy giving his perspective on the need for new technologies and the impact they could have on the production and delivery of Renewable Energy in India.
Dr YBK Reddy: SECI (Solar Energy Corporation of India) is the prime agency in India’s renewable energy (RE) sector. Currently, we handle a 60 GW portfolio is at various stages of completion - some capacity is completed, some capacity is under construction. At the moment, we develop simple solar and wind projects.
India has a target of producing 450 GW from renewable energy by 2030 and 500 GW from green energy sources - our anticipated load, itself, will be around 300 GW by 2030.
The question is: how do you manage 500 GW in the grid?
If we continue to do the simple RE projects, there will be a grid balancing issue because solar and wind resources fluctuate. It will be difficult.
As a solar energy corporation, we identified this problem long ago, so we develop our projects with energy storage. Most of the DisComs (distribution companies) have big ticket generation demands, so we came out with the first innovative peak power tender: energy storage tenders that assure peak power. With solar and wind generation, which is intermittent in nature, there is no assurance of peak power.
In the next tender, we came out with round-the-clock (RTC) renewable energy. The aim here is to address baseload plants in the future. Due to funding and other climatic issues, no one is yet developing thermal plants, so we are developing RTC renewable projects through which base load will be met, Right now we are developing some new concepts along the same lines.
Because renewable energy capacities are already tied up, many of the DisComs have disturbed load covers. What we are trying to do is counter the load curve by developing projects where we’ll publish the load curve in the tender itself. We’ll ask the developer to follow the load curve plus or minus 10%,With that, the load curve will flatten down, so that future RE capacity addition can be made smoothly.
We are also working on hybrid projects that will provide some flexibility in output and we’re also looking at standalone energy storage pilots initiated with Ministry of Power. That, again, addresses various grid level issues. Instead of curtailing energy supplies, states can store energy and get it back during peak periods.
In parallel, we are trying to develop several other innovative tenders. Power is currently highly regulated, but we want to make it available to open access or through an exchange.
Lastly, we are also working on green hydrogen. We plan to develop stable RE power to green hydrogen developers and we are working on this right now with various stakeholders.
Rod Morrison: So to start with, Colin, is it a constant evolution of technology options?
Colin Chen: There are already a myriad of options out there right now. And the drive to RTC (round-the-clock) power is certainly something that we all need to embrace. We’re all driving towards the 1.5 degrees target and the only way you can do that is to replace your entire baseload. And that’s what we’re really talking about - RTC is baseload.
All the current solutions are there: solar, wind, battery and hydrogen. The issue is that they all have different characteristics: solar does not work in the dark, wind doesn’t work when there’s no wind, batteries are expensive etc.
So, the way to resolve the issue is with the combination of all or part of this set. What we really need to look at is the way to scale the solution.
The other issue to address is the ability to manage all the different characteristics of these power solutions as and when they come online/offline to achieve continuous delivery of power.
The interesting and important part of this exercise is the way various developers can harness different types of renewable energy (RE) characteristics to produce an output or deliverable that satisfies RTC power.
The cost of RE is falling, but the issue is not only about the cost of delivering power but how we use it, how end users accept it and how it is delivered. There will be a cost – there’s always a cost - for a short period of time as the market develops but costs will be driven down as scale is achieved and more finance becomes available.
Rod Morrison: Battery storage time is limited, for perhaps two hours. You get a lot of storage capacity in a pumped hydro project but, in terms of storage solutions, where do you think we are heading?
Colin Chen: Pumped hydro and battery are certainly storage solutions that are required but they both have issues.
Batteries are good because you can deliver the current and voltage you need instantaneously and that allows for great flexibility but, as anyone with a cell phone knows, batteries get very, very warm and, if you are not careful, you have a potentially combustible product.
Batteries are part of the solution, but they are inefficient in their ability to store power over a long period of time. Nevertheless, technology is continuously developing and there will come a time when batteries deliver energy for more than two hours – maybe even 24 hours. But that development is some way down the road. It will come, nevertheless, because it’s a requirement.
Pump storage is very old technology, but it’s inefficient. There’s lots of frictional loss and there’s lots of loss in terms of where the pump storage is located because you need height. You need lots of capacity and you need to be able to pump it up at times when energy is cheap. Power is needed to deliver the storage potential.
Pump storage is a way of smoothing out your power delivery. It’s a way of buffering some of your requirements but it’s not the entire solution. The solution is to understand and manage what we have in terms of power.
I’d like to touch on this transitional period we’re in. We cannot turn off all our coal fire power stations in one fell swoop, so they need to be brought down slowly as the technology develops.
Rod Morrison: Kapil, Reliance Industries is a major player in India. What is the optimum solution for India now and how do you see it develop over the next 12 to 24 months?
Kapil Mahesh: The optimum solution must keep evolving, otherwise we are not figuring out what we call the ‘optimum solution’. I mean solar also wasn’t an optimum solution for India in 2010, for instance.
We’ve all heard how the cost of renewable energy has reduced but an optimum solution must be an evolving mix of everything.
For the last 10 years, solar was promoted as a mainstream source of energy and now it is widely available at the right price. But for the next 10 years the focus will be on how to make enough renewable power that satisfies baseload requirements and to make it round the clock. A constant, 24/7 supply of renewable energy would be an optimum solution and there are multiple options in achieving that target.
At the moment, batteries appear to be the leading contender in providing RTC energy compared to all other solutions.
Right now, we see something like two to three hours of storage but with improvements in technology for batteries or in new electrochemical solutions then energy storage could serve for 16 or 17 hours outside of solar or wind production. To make supply even more reliable, it would be even better if you have solar, wind and hybrid storage solution.
We are trying to figure out an energy transition and for that it needs to be in the form of electrons. As Barat mentioned with SECI’s efforts towards hydrogen, if we can convert this electron to molecule at the right place and at the right moment then we can see if that makes sense.
Pump hydro, as Colin mentioned, is a good solution but it has its limitation in terms of geography. You cannot implement it everywhere. I may want to set up my renewable plant in a desert and I don’t have a water reservoir. What do I do?
Battery storage can be anywhere. We’ve seen levels of renewable energy production reach 160 – 165GW, out of which solar and wind contribute the majority. But going forward, if we need to add 300 or 400 more gigawatts, then would the grid be able to take it - especially in a country like India where grid stability and quality is not perfect.
We really need to figure out how to make more dispatchable power. That will make renewables more attractive, and it will also reduce our impact on the transmission system.
So, it’s an evolving process and maybe we have not yet figured out the optimum solution. For the last 10 years we’ve been working on bringing renewable prices to a more attractive level. The next 10 years will be about providing renewable energy 24/7 and at the right price, of course.
Rod Morrison: What did you mean by electrochemical solutions?
Kapil Mahesh: A battery solution lies within an overall electrochemical solution and there could be mechanical solutions to store power as well. You could store it in flywheels, you could store it below ground as well. There are various other solutions which are available for storing energy. How efficient they are needs figuring out.
Even within the electrochemical solutions, you see various chemistries. It’s lithium now but we need to figure out how to bring new technologies and chemistry into the game.
At Reliance, we really looked at whether lithium is the best solution. We have been the largest user of lithium-ion technology, not necessarily for renewables but as a telecom supplier. We have experience using lithium iron when most others were using lead.
Are we on the right track looking at just lithium iron phosphate (LFP) or lithium-ion battery (NMC) technology? We’ll certainly look at alternatives and that’s why we’ve invested in companies that make sodium ion or metal layer etc. where requirements for lithium are much less because, otherwise, you’re open to being dependent on certain countries for the rarer materials.
Rod Morrison: You mentioned 14 or 15 hours a day from electrochemical solutions is possible.
Kapil Mahesh: It’s possible. I would categorise them as long duration energy storage and that’s where chemistries, like metal layer would play a role. The inner characteristic of those batteries could allow you to store power for a very long duration.
Rod Morrison: Ramanuj, could I have your initial comments on technology.
Ramanuj Kumar: For context, the COP26 target for India in terms of renewables is 500 gigawatts by 2030 - that’s installed capacity. India will need roughly 27 gigawatts of energy storage solutions in terms of battery and 10 gigawatts of pump storage hydro by 2030 to accommodate this 500 GW of renewables.
That’s a huge capacity to achieve by 2030. Today, less than 100 megawatts of energy storage solutions are operational or near completion.
The solution needs to be looked at from two perspectives: cost and meeting peak demand and all that entail in terms of ancillary services or grid support and grid management.
Today, you have two- to four-hour solutions for meeting peak demand scenarios but NTPC has recently issued a tender seeking a six-hour battery storage solution.
The question is, are there enough mature solutions available to meet a 6-hour storage requirement and if the technology is available, at what cost? We are yet to see what that cost could be.
We are seeing a gradual adoption of storage solutions and technologies. Battery energy is currently at the forefront. Pump storage hydro is a solution, but it is expensive, and it can’t be put up everywhere.
Another important factor for pump storage is the lead time. You can commission battery storage in the span of 18 months, but pump storage will take more than four years. So, pump storage as a solution is theoretically available on paper but it has several limitations in terms of geography and commissioning time, as well as efficiency in terms of how much energy you can derive from it.
India will have to look at a combination of energy storage solutions to offer round-the-clock power, or 15-to-16-hour supply when solar is not available. We are still some distance away from achieving that aspiration in India. Even developed markets have yet to reach the stage where they’re offering energy storage for long periods of time.
That 16/17-hour solution will have to be looked at from the perspective of affordability and tariff. So, while your large corporate customers may be able to adopt some solutions because they may be more competitive and reliable in comparison to, let’s say, grid power, they may not necessarily be cost effective for retail consumers. In that case, renewable energy will continue to be bundled with traditional sources of power. And that’s why studies and reports for at least up to 2050, predict 60% of energy demand in India will continue to be met through coal.
Rod Morrison: What’s the capacity for managing demand? We talk about the generation side but is there much that can be done in terms of demand management in India?
Kapil Mahesh: There have been discussions looking at demand management - differential tariffs for peak and off peak, for instance. That has been spoken of for a very long time but in terms of regulatory/policy direction, it has yet to come through, possibly because our distribution utilities are afraid of losing revenue.
I don’t think a serious analysis has been done as to the impact demand management will have on DisComs’ revenues. We need to look at demand management very seriously because if we are to meet peak hour demand or peak demand through storage solutions then we need to have a differentiator in terms of how to manage that peak hour demand and how to modulate consumer behaviour to accommodate their requirements at a time when peak demand is not there.
Rod Morrison: Sajal?
Sajal Kishore: Being on the finance side, I have a different take on this subject.
In terms of the ability of developing technologies to access the markets, it’s clear that the offshore capital markets favour proven, established technologies such as traditional solar, wind, or hybrid solutions.
The challenge is that adding more renewables just adds more intermittent sources of power and peak power deficiencies creep in - we’ve seen blackouts in advanced countries such as in the state of South Australia because of a complete reliance on wind energy.
The grid is also an issue. How do you build grid stability from a technologies point of view? That is a big issue in most countries increasing their share of intermittent sources of power generation like in India.
Renewable energy sources are also developing and evolving across different states in India and this growth in renewables also brings challenges in ensuring security of power supplies.
The other problem is power prices. Where we have C&I (commercial and industrial) customers coming into the market, these have shorter dated PPAs unlike the typical 25-year fixed price PPA. With these types of contracts, you also get more merchant price exposure. With technology is evolving, it’s very difficult to have a long-term view on power prices.
That brings the challenge of how to put a long-term financing solution together for a project that may have a five- or seven-year PPA, with less certainty on future power prices and contract renewals at current prices.
The pandemic highlighted an important stress point for us where we have seen prices fall, especially in the developed markets like Australia. This creates negative rating pressures for transactions with merchant price exposure. However, most of Asia, we still benefit from low per capita electricity consumption and growing electricity demand. Electricity consumption will continue to grow in the developing world while it will decline in the developed markets.
Rod Morrison: Colin, I don’t know how many hydrogen projects you’re looking at right now, but hydrogen is the buzz word. How do you perceive the development of the local industry in terms of credit quality for your construction projects?
Colin Chen: I look at a new green hydrogen proposal every week and they all go into several billion dollars. Everybody’s got big plans but it’s going to take a time to get our heads around it.
The pandemic, as well as the war in Ukraine, has raised a couple of issues such as security of supply and understanding the chain. When we look at a transaction, we take a view on the risk of not only getting the project off the ground but reaching Commercial Operations Date (COD). Reaching COD is the most important part of the project, because until it reaches that stage its value is almost zero.
What we’ve come to realise, and all developers understand this, is that unless you understand your whole supply chain, including the solar panels, you will be at a severe disadvantage when asking banks to finance the project.
The reason why we use a lot of Chinese panels is because of price and their ability to deliver the quantities and quality we’re looking for. These attributes need to be translated into local manufacturers. As local manufacturers become more familiar with what is required, they become better and more reliable. That drives the cost down.
Local manufacturers are ramping up to meet international standards. The shift in the market has already begun. We have security of supply as well as the ability to finance that supply. We’re now mainly looking at transactions where panels are manufactured locally.
Rod Morrison: Are local panel prices competitive?
Colin Chen: You need to look at the whole package. If you have panels coming from 3,000km or 4,000km away, you need to price that in. But if you have a local supplier that has international experience as well as quality, then you have to take that into account. On an overall package, the answer to your question is ‘yes’.
Rod Morrison: Kapil, could you tell us about the ramping up of your local production and the development of your hydrogen industry.
Kapil Mahesh: We really want India to be a number one exporter of energy in the next decade and supplying hydrogen at US$1 per kg is part of the vision. To achieve that in the next decade you really need to figure out energy security and transition.
At Reliance Industries, we are coming up with a whole ecosystem to look at the challenge holistically. When I talk of ecosystem, I would divide it into upstream, midstream and the downstream side of the whole process. Upstream, you have green hydrogen production and to produce green hydrogen you first need to generate lots of cheap renewable power round the clock.
We’ve assigned four factories to produce modules from polysilicon, batteries for storage, electrolysers and fuel cells. Then we are setting up renewable power planets, of up to 100 gigawatts, primarily to produce green hydrogen.
Then you need to focus on the midstream - what do with the hydrogen once it’s produced. That’s where you look at storage solutions and transportation. It’s not easy. How do you handle it? Do you compress it into liquid? Do you pump it through pipelines? They all have their own challenges.
Downstream. In the previous session Chen spoke on green steel, green fertilisers etc, so I won’t repeat it.
What I will say is that India is largely an end user of green hydrogen. We have 6 to 7 million metric tonnes of hydrogen currently available, the majority of which is to be used for ammonia. Demand for hydrogen could more than double by 2030 timeframe, so we have good market opportunity when it comes to hydrogen. We are both a consumer and a producer.
Rod Morrison: Ramanuj, would you like to make any comments on the development of local manufacturing and then leading into hydrogen?
Ramanuj Kumar: Kapil spoke about large industrial players - petroleum refining, steel and cement sectors - that are already heavy consumers of grey hydrogen. These companies are seriously looking at green hydrogen as a supply option and are looking to build vertically integrated operations to meet their own demand.
From the Indian context, the government has set up a target of let’s say 5 million tonnes of green hydrogen by 2030 as part of its green hydrogen push and it has offered some incentives to bring down the overall cost of production.
Today, the cost of green hydrogen is roughly 3 times that of grey hydrogen, roughly US$5 per kg versus US$1.50 per kg compared to grey. We need to reduce the cost of green hydrogen by almost one third to make it competitive.
India Hydrogen Alliance, which has asked for financial support from the government, is focusing on certain industrial clusters in the country as a captive consumer base and is targeting a price of US$2 per kg in the medium term. That’s by 2030. There is a concerted push but there is no policy driven demand side support.
If we look at how the solar, wind and renewable energy matured to the stage at which it is today, it was largely due to the Renewable Purchase Obligation mandates introduced as a policy measure. That forced the distribution utilities and developers to invest in green energy projects and they were assured a financially viable tariff. That then made projects commercially and financially viable and lenders and investors started to take interest.
I think we’re at a situation in the green hydrogen ecosystem where some demand side push is required. There was talk of the government coming out with a hydrogen purchase obligation for the large industrial sectors but that has yet to happen.
So, until some push takes place on the demand side and in the absence of a carbon tax, there is little incentive for industrial players to voluntarily move to a green hydrogen consumption. Of course there are sustainability issues and green credentials and labels that companies like to boast about, but without a serious demand side policy push coupled with further liberalisation and other measures, then green hydrogen will remain an expensive option.
Rod Morrison: Is there an easy win in terms of green hydrogen to ammonia as an import substitution?
Ramanuj Kumar: We import large amounts of ammonia as a country, so if we’re able to push through the green hydrogen ecosystem, then that could lead to a large import substitution and security of supply,
Rod Morrison: Kapil, where do you see the cost savings coming from? Is it simply a question of economies of scale or are there other technology innovations that will drive the cost down?
Kapil Mahesh: There are three major levers.
The first is the production cost of renewable energy. We need to round-the-clock power near the US$20 per MW mark and we’re not there yet.
The second lever would be an improvement in the Capex for electrolysers, which currently is - depending on the technology - somewhere between $US700 to US$1,900 per KW. That needs to come down to the US$200 to US$400 per KW range for the numbers to work.
The third level is efficiency. That needs to improve from the 65% mark to 85% - 95%.
There are smaller elements that could contribute to lowering costs, but these are the major ones.
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