Mr. Vivek Bhardwaj
Sales Head India – GoodWe
As per recent announcements by the Ministry of New Renewable Energy, the Indian government is planning to announce 4GW of storage tenders. As per the feedback of NTPC senior management, grid frequency stabilization and peak power shifting are burning issues that have the attention of senior officials of the ministry.
As per the definition of IEA, the flexibility of a power system refers to the “extend to which a power system can modify electricity production or consumption in response to variability, expected or otherwise”.
Hence these initiatives by the Indian government for load shifting due to controlled generation is intended to result in the “desired profile”.
The projected peak demand developing in India in the evening is due to the emergence of aided cooling requirements and upcoming electric vehicles. With the advent of EV, a slow charger of 5KW is likely to be switched in the evening.
Frequency containment reserve (FCR, aFRR, mFRR) in Internal Electricity Balancing Market means operating reserves necessary for constant containment of frequency deviations (fluctuations) from the nominal value to constantly maintain the power balance in the whole synchronously interconnected systems.
What will be interesting is how the monetization opportunities are offered in India. As per industry experts, the “main valuation “for such FCR tender is the reserved reverse auction rate (e.g. $ 100,000 / MW/ year) to provide a guaranteed FCR response. In addition, there are minor upside valuations to the investor, like merchant power.
To offer the above FCR by a centralized storage solution, however, the OPEX requirement is quite large, and profitability does not match the inherent risk. As per some estimates, an EIRR of 8% -12% maybe expected on such FCR centralized projects with self-financing (debt is harder to secure).
The grid operator will ask the buyer to commission (0-30 sec, 30 sec and above) grid balancing solutions and procures this capacity. The operator (& owner) to guarantee that enough reserves are committed and activates balancing energy in case of actual frequency deviations.
On the other side for decentralized storage players like GoodWe there are similar opportunities.
Small scale storage with good cumulative flexibility, like the one offered by GoodWe, is also under the radar to provide services to the grid operator. Till now decentralized are having lacune due to:
- Insufficient scale
- Failing to maintain technical requirements
- Licenses and fee
- Lack of market and regulator know-how
However, with the advancement of technology like at GoodWe. If a company manage a VPP, with thousands of units inter-connected storage systems then it is possible to participate in the TSO market to provide congestion relief.
Usually, it means that some power from the GoodWe battery may be reserved to participate in the VPP i.e., Capacity vs Usable battery. In addition, over time the battery degradation needs to be accounted.
A smart VPP operator can exploit the battery reserves for the inner band of 50Hz and use the slower FCR units in the outer bands. Such methods will need three parties. A technology partner like GoodWe, a VPP partner (which is missing in India) and a contract which obligates the participating body.
Decentralized and Centralized Storage
Goodwe is the world’s largest decentralized Hybrid energy storage system (as per Wood Mackenzie) having supplied thousands of units to Europe with a leading market position. The decentralized storage inverters are already very popular in existing smart grids where thousands of such units inter-communicate & inter-operate as a cohesive unit.
Decentralized inverters significantly reduce the need to increase transmission infrastructure to deliver FCR from far flung areas (like in central storage) to the city. Globally the centralized storage is co-existing with decentralized.
Technology (inverter, cell & battery) China will be our best friend
India will need to take a stance on Li Ion cell technology type to be adopted. For reasons of low cost, India has already taken baby steps for LFP Cathode route, same as China. Compare the price difference between NCM 523 and LFP price in RMB / T, in the below chart. LFP is the winner by leaps and bounds. For a cost-sensitive market like India, LFP battery will be the winner.
NMC batteries, mostly promoted by the West, have better density compared to LFP. But two things go in favor of LFP battery for India which cannot be ignored, are the lower cost of ownership in India and better temperature response for LPF is not needed due to Indian climate.
The patents’ restricting China over LFP will start to expire in 2022. Limitation of LFP exports on Chinese producers will be largely removed, along with the licensing fee for non-Chinese LFP cell producers. The removal of this IP barrier could become the largest opportunity for LFP-based Li-ion batteries to rapidly gain market share in the energy storage market outside China.
For LFP cathode technology West has already ceded defeat to Asian giants. Which is why amongst the deluge of new storage announcements, there is not even a single (except 1) announcement for LFB cell manufacturing.
Rather the West is taking a gamble on high-density batteries like SSB and NMC. For India to go the same path as the West and be as innovative, it is unlikely that any Indian company has any chance to succeed.
Therefore, it may be in the best interest of India to partner with China in LPF Cathode due to lower cost and temperature suitability.