Techno-Economic Potential: Frequently Asked Questions

This page compiles the most frequently asked questions as they relate to the South Asia energy storage analysis.

In collaboration with regional stakeholders, NREL developed a first-of-its-kind assessment of cost-effective opportunities for grid-scale energy storage deployment in South Asia in both in the near- and long-term. 

Top Ten FAQs

Which modeling tools are used for this study?

Long-term capacity expansion modeling: ReEDS India

Production cost modeling: PLEXOS, a commercial software from Energy Exemplar

Renewable energy siting, buildout and performance: The Renewable Energy Potential Model and System Advisory Model

What storage technologies are considered in the study?

This study is technology-agnostic with respect to energy storage; however, the parameters defining storage in our models, such as cost forecasts and operating limits, most closely align with lithium-ion battery energy storage systems and pumped storage hydropower. Various durations of battery energy storage are considered, including 1-hour, 2-hour, 4-hour, 6-hour, 8-hour, and 10-hour devices. ReEDS determines the least-cost optimal mix of these storage technologies, generation resources, and transmission to serve the needs of the system. Other storage technology parameters are not considered because of lack of cost projection data and limited proven potential for use in the power sector.

Does the study consider the impact of COVID-19 on demand projections?

Yes, the study assumes both energy and peak demand in 2020 remains at the same level as 2019 for all Indian states due to the global pandemic. Between 2020 and 2025, we use The Energy And Resources Institute's forecasts for electricity sector demand growth recovery under a V-shaped scenario. The study assumes that demand growth rates will return to pre-pandemic levels after 2025 as per 19th Electric Power Survey.

No changes have been made to the official demand projections of Nepal, Bhutan, and Bangladesh.

Read more about the V-shaped scenario: Bending the Curve: 2025 Forecast for Electricity Demand by Sector and State in the Light of the COVID-19 Epidemic.

Does the model consider the seasonal, diurnal, and spatial changes in electricity demand and renewable energy generation?

Yes, the modeling for this study considers both the inter-temporal and geographic variability of electricity demand and renewable energy. The capacity expansion model uses a time-slice representation while the production cost model (PCM) simulates hourly operations for an entire year. States and union territories in India, as well as Nepal, Bhutan, and Bangladesh are each represented as individual balancing areas with unique electricity demand profiles and demand growth assumptions. Wind and solar resources are represented with site-specific hourly capacity factor profiles.

What factors drive the deployment of energy storage in India?

The study shows that energy time-shifting and capacity services are the largest source of value for energy storage which drive their deployment both in the near- and long-term. Lower battery costs and lower solar PV costs also lead to more investment in energy storage capacity.

Why is battery storage favored over pumped hydropower?

High capital costs of pumped hydropower in the Reference Case leads to more battery energy storage than pumped hydropower. However, a 30% cost reduction for pumped hydropower compared to the Reference Case, at $1.06 million/MW (6.9 INR Crore/MW), is the tipping point to be competitive with battery storage technologies in the near-term.

What is the price at which utility-scale energy storage is economic for Indian utilities?

Economic viability of storage technologies is relative to the cost of other generation technologies, existing penetration of storage, the generation mix and the evolution of load shape over time. Considering the cost of generation technologies assumed in this study, storage deployments in the Reference Case are seen starting in 2023 when the capital cost of 2-hour duration battery storage is projected to be 280 $/kWh (all-in cost) and the annual fixed operations and maintenance cost is projected at 24 $/kW.

How does energy storage get utilized in 2030 and 2050 operations?

Storage is typically charged during the day when solar generation is high and discharged during evening and morning time. Energy storage charging and discharging has seasonal and diurnal patterns in 2030. However, we see only diurnal patterns in 2050. The shifting patterns of utilization between 2030 and 2050 are enabled by longer duration (i.e., longer than 4 hours) energy storage that becomes economic in the late 2030s. Energy storage also provides the bulk of reserve requirement throughout the day.

Does the model include cross-border flows between India and Nepal, Bhutan, and Bangladesh?

Yes, ReEDS-India includes cross border flows between India and Nepal, Bhutan, and Bangladesh. For more details, see section 2.6 of Energy Storage in South Asia: Understanding the Role of Grid-Connected Energy Storage in South Asia's Power Sector Transformation (2021). The PCM includes all existing and planned generation capacity in Nepal, Bhutan, and Bangladesh.

What benefits could countries like Nepal, Bhutan, and Bangladesh expect from investing in energy storage?

Energy storage in Nepal and Bhutan can help with optimizing exports to India, thereby helping the South Asia grid to accommodate more hydropower and renewable energy in the system. Energy storage in Bangladesh can help to displace fuel oil generation, reduce the production cost, and provide balancing services.

Which generation technologies other than energy storage are considered as possible candidate for future buildouts?

Conventional Renewable
Combined cycle gas turbine gas Distributed PV
Combined cycle gas turbine LNG Hydropower pondage
Combined cycle gas turbine Naptha Hydropower run-of-river
CT gas Hydropower storage (reservoir)
Cogeneration Bagasse Onshore wind
Diesel Utility PV
Nuclear  
Subcritical coal  
Subcritical lignite  
Subcritical oil  
Supercritical coal  
Waste heat recovery  

Does this study consider India's 450 GW renewable energy target by 2030?

Yes, the model enforces the policy targets of 175 GW of renewable energy by 2022 and 450 GW of renewable energy by 2030.

How are fuel costs projected till 2050?

All fuel costs other than coal are assumed to remain constant over the model period. Coal fuel cost has an annual escalation rate of 2% in addition to the annual inflation rate.

Does this study consider hybrid renewable energy plus storage buildouts?

This study does not consider hybrid renewable energy plus storage buildouts explicitly. However, the results point to significant synergies between solar PV and energy storage deployment. States that show high amounts of cost-effective solar PV and energy storage are good candidates for further investigation into potential opportunities for hybrid projects.

Does the model consider transmission constraints?

Yes, modeling considers inter-state transmission constraints between 34 balancing areas in India. Each balancing area represents a state or union territory. Cross-border transmission capacity between India and Bhutan and between India and Nepal is assumed to be sufficient to accommodate flow of all surplus power from these countries. The transfer capability between India and Bangladesh is limited by capacity of high-voltage direct current interconnections.

What is the contribution of energy storage and renewable energy towards firm capacity?

The storage capacity credit method used for this study characterizes energy storage capacity and duration that can be used to serve peak demand. The potential of storage to serve peak demand is considered by performing several simulated dispatches against the load profiles within each of the balancing areas. Importantly, this study considers the impact of several factors that impact the capacity credit of energy storage:

  • Changing load shape over time;
  • Increasing penetration of solar PV in the generation mix; and
  • Increasing deployment of energy storage.

For VRE technologies (i.e., wind and solar), the model estimates a seasonal capacity credit for each region and technology combination using an hourly load duration curve approximation of expected load carrying capability performed between solve years.

For more information about the methods used to calculate capacity credit, see section 7.2.1 (VRE) and 7.2.2 (Energy Storage) of: Regional Energy Deployment System (ReEDS) Model Documentation: Version 2019.

What types of planning and operating reserves requirements are included in the study?

This study assumes a 15% planning reserve margin for India. The operating reserve requirement is equal to 5% of hourly electricity demand separately for each region in India.

How does the model decide on retirements?

The model makes both age-based and economic retirements. Conventional generators, renewable energy generators, and energy storage retirements are based on assumed lifetimes. In addition to age-based retirements, ReEDS-India also endogenously retires conventional generation. When making decisions about endogenous retirements, the model is effectively trading off the value provided to the system by the plant versus the costs incurred by keeping the plant online. If the value is not sufficient to recover the costs, the model will choose to retire the plant.

What constraints are modeled for energy storage devices in the PCM?

Energy storage devices are modeled in PCM with maximum capacity (MW), energy content (MWh) and round-trip efficiency (90%).

Why does India need energy storage?

The model does not force any energy storage into the system. Energy storage along with other generation technologies provides the least-cost mix of resources to fulfill India's needs for energy, capacity, and flexibility.

What regulatory changes could help to derive the maximum value from energy storage?

Regulations that allow and compensate energy storage to provide various grid services such as capacity adequacy, energy time-shifting, ancillary services, and balancing services can enable energy storage to compete with other resources.

Why does the model build gas combustion turbines even when there are no plans for additional gas investments in India?

The Reference Case does not restrict investments in any generation technology. However, a relatively high variable cost (~8 INR/kWh) is assumed in the model for future gas combustion turbines buildouts based on the variable costs of operating existing gas plants using imported liquid natural gas. Also, gas fuel limits are imposed in the model based on projected availability. We see investments in gas combustion turbines in the Reference Case beginning in the late 2020s, primarily because it is a cost-effective option to provide firm capacity for the planning reserve margin.

How would a policy where no new investments in gas combustion turbines are allowed (or other type of restriction on gas plant growth) impact energy storage buildout?

In the near-term, policies restricting investments in gas capacity have negligible impact on the total deployment of energy storage. However, in the scenario where no new gas-fired plants are allowed to be built, energy storage capacity grows more slowly in the long term, ending 38% lower in 2050 compared to the Reference Case. For more details, see section 3.4 of the report.

Are the space requirements of energy storage and renewable energy considered in the study?

Renewable energy siting by the reV model appropriately considers the space requirements including land exclusions where renewable energy cannot be built. However, energy storage space requirements are beyond the scope of the study.

Is there any relationship between the solar and energy storage buildouts?

We see a strong synergy between energy storage and solar PV deployment. The Low Solar PV Cost scenario has more investment in both solar PV and energy storage in the near- and long-term compared to the Reference Case.

What are the value streams considered for energy storage in the model?

We consider energy time-shifting, capacity for long-term capacity adequacy and operating reserves as the value streams for energy storage.

What are the biggest revenue streams for energy storage?

Energy time-shifting and capacity services are the largest revenue streams for energy storage both in the near- and long-term.

Will it be economical to build energy storage projects if they are not allowed to provide firm capacity?

The economics of building any energy storage is dependent upon the value streams and capital cost. We see less investments in energy storage if they are not allowed to provide firm capacity.

Will it be economical to build energy storage projects if they are not allowed to provide operating reserves?

Compared to the Reference Case, storage deployment essentially remains unchanged through 2040 if energy storage is not allowed to provide operating reserves. This is because existing and planned conventional capacity is sufficient to supply operating reserves, and the value of providing operating reserves from energy storage is low.

However, the rate of growth for energy storage deployment slows beyond 2040 and total capacity is 25% less in 2050 compared to the Reference Case. This is because, with energy storage barred from contributing to operating reserves, new conventional resources are needed to meet the operating reserve requirement. And because new conventional capacity is built, there is less opportunity for energy storage to provide energy time-shifting and capacity services past 2040.

How would the opportunities for energy storage change if no new fossil generators were built in India, whether through a policy action or other external variables (e.g., poor investment environment)?

In the near-term, policies restricting investments in gas and fossil-fueled capacity have negligible impact on the total deployment of energy storage. In the long-term, policies restricting investments in fossil-fueled capacity leads to 15% higher energy storage capacity paired with 18% more cost-effective solar PV and 28% more wind by 2050. There is also a shift to longer-duration storage capacity. Significant investments in biomass are also cost-effective starting from the early 2030s to meet the planning reserve margin and seasonal energy needs.

Why do the results show investment in longer duration batteries after 2040?

Longer-duration battery storage projects (e.g., longer than 4 hours) become more cost-effective as the projected cost for lithium-ion battery technologies decline in the future. Also, capacity credit of shorter duration batteries goes down as you add more storage to the system.

How can a utility justify building energy storage with its regulatory commission?

For a specific project, a detailed benefit-cost analysis can help determine if an energy storage project would be cost-effective. Production cost modeling can be used to calculate the potential operational savings for a utility from services including energy time-shifting, ancillary services, firm capacity, and real-time balancing. Detailed power flow and dynamic stability analysis can also be used to assess the potential saving from deferred transmission and distribution equipment upgrades.

Hydropower plants have provided the necessary flexibility over the years. Why does India need energy storage for flexibility?

Energy storage investments presented in this study are an outcome of least-cost planning principles. Flexibility is an added advantage with the investments in energy storage. Hydropower plants have provided the flexibility for years and will continue to do so. However, additional flexibility may be helpful considering the limited existing and planned hydropower capacity (~60 GW) and 450 GW of renewable energy by 2030 and 1737 GW renewable energy by 2050.

What are the drivers for energy time-shifting value for energy storage in future?

Energy time shifting value is dependent upon the price differential during the day. This price differential is driven by the highest cost generator dispatched during the day (often setting the peak price), penetration of renewable energy (if plentiful, often setting the low price when energy is abundant midday), and transmission constraints.

The price calculation in the PCM is different from the price discovered in Indian power exchanges. Can energy storage get the same energy time-shifting value in today's power exchanges that are shown in the modeling?

It is true that the price calculation in the PCM is different from the price discovered in today's Indian power exchanges. Because this is a forward-looking study, the results show increasing energy time shifting opportunities with higher levels of renewable energy penetration in the future. It is reasonable to expect a similar trend going forward in India's power exchanges as well.

Why does the result show energy storage provide the bulk of India's operating reserve requirement?

Energy storage provides the bulk of reserve requirement because 1) it avoids commitment and start-up of additional thermal machines to provide operating reserves 2) the lost opportunity cost to provide energy is relatively low during the daytime when solar generation is high.

Can energy storage provide 100% of operating reserve requirements?

Yes, energy storage devices can provide 100% of reserve requirements on some days in 2050 if they are allowed to do so.

Is there any system level benefit when energy storage provides operating reserves?

Energy storage providing reserves avoids commitment of additional thermal (coal and gas) machines, reducing annual production cost by 3.3%.

Can energy storage balance renewable energy and demand forecast errors in real time?

Yes, the study shows that energy storage can balance renewable energy forecast errors in real time.

Considering the variability of renewable energy, would energy storage be required to cycle excessively?

The results show less than one average energy cycle per day for all durations of energy storage.

Can energy storage also help in relieving transmission congestion or transmission investment deferral?

The literature suggests that energy storage can help in transmission investment deferral and relieving transmission congestion. However, this is outside the scope of this study.

Can energy storage help in achieving 100% generation from non-fossil fuel sources?

Energy storage along with renewable energy and hydropower can supply more than 80% of total generation on an annual basis in 2050. On some days, non-fossil fuel sources can supply almost 100% of energy requirements in the 2050 Reference Case.

Is there any relationship between renewable energy curtailment and energy storage?

This aspect was not explicitly studied. However, the results show 5.8% of renewable energy curtailment in 2030 with 90 GW of energy storage and 3% of renewable energy curtailment in 2050 with 635 GW of energy storage.

How does the model include investments in Nepal, Bhutan, and Bangladesh?

ReEDS-India does not optimize generation and transmission investments in Nepal, Bhutan, and Bangladesh. However, using the PCM scenarios were evaluated with and without storage in strategic locations in Nepal, Bhutan, and Bangladesh to understand the changes to operations and potential value of energy storage in these locations.

Is there any mutual benefit of energy storage for South Asian countries?

Energy storage helps in reducing production cost and optimizing cross border trade thereby helping the South Asia grid to accommodate more hydropower and renewable energy in the system.