A sharp jump in the price of lead in global markets in recent months has put pressure on the margins of battery makers, who are now forced to pass on a part of the extra cost to their consumers, the power producers. Rising cost of battery backup could push up the overall cost of new projects or diminish the savings from falling prices of solar panels. The price of lead in the global market has jumped from about $1,700 a tonne on 1 April 2016 to over $2,300 a tonne on 31 January 2017, an increase of 35%, according to London Metal Exchange data. Local producers also charge import parity prices. Although India produced 211,000 tonnes of lead in the April- January period, slightly less than what was produced year ago, production value jumped 23%, according to data from the mines ministry.
Lead-acid batteries are a major part of power storage systems in renewable power projects. They enable power supply in the night in the case of roof-top and off-grid projects and act as back-up before diesel generation sets take over in larger projects. Lead and lead alloys account for about 70% of the cost of these batteries and could influence the integration of renewable power into India’s electricity grid as well as the transition to electric-powered vehicles for transport. According to India Energy Storage Alliance, the current market size for lead acid batteries is around Rs27,000 crore.
“The metal is a big component in our business. So we have to make some pricing changes as per market forces. In the last two months, prices have gone up between 5-7%. We ensure that benefits of innovation (in pricing) are passed on to consumers,” said Vipul Sabharwal, managing director, Luminous Power Technologies Pvt. Ltd, a leading producer of power systems and batteries. To prevent a major price shock, battery producers are seeking ways to tackle the cost escalation. Kunwer Sachdev, managing director, Su-Kam Power Systems Ltd, said, “Despite the increase in costs, we try our best to cushion this increase. Su-Kam has increased production volume of batteries. This has led to reduced production cost. Thus we are trying to mitigate the increased cost of batteries from being passed on to the customers.”
Industry experts say that a technology breakthrough-driven disruption in the battery market, along with policy and regulatory support, could lower costs and stimulate growth. “Every player in the power storage business is evaluating business models for deployment and making investments in R&D (research and development) for making systems compact, competitively priced and to enhance operation time,” said Sambitosh Mohapatra, partner, energy utilities and mining, PwC India.