Storage Support: MoP issues guidelines for BESS procurement

MoP issues guidelines for BESS procurement

India has announced ambitious plans of setting up 500 GW of renewable en­ergy capacity by 2030. This revised target (up from 450 GW previously) was an­n­ounced by Prime Mini­ster Narendra Mo­di at the Cli­mate Change Con­ference (COP26) summit in November 2021, alo­ng with India’s goal of meeting 50 per cent of its energy from renewable re­sou­r­ces by 2030. This will help achie­ve the co­un­try’s target of net zero emissions by 2070.

To encourage large-scale renewable energy integration into the country’s po­wer sy­stem, the government is working out a roadmap for the installation of battery en­ergy storage systems (BESSs), whi­ch can su­pport grid reliability. Accor­ding to the Central Electricity Authority’s (CEA) report on the optimal generation capacity mix for 2029-30, India’s install­ed renewable energy capacity will inclu­de 27 GW/108 GWh (four-hour storage) of grid-scale BESSs by 2030.

The Ministry of Power (MoP) recently notified the “Guidelines for procurement and utilisation of BESS as part of generation, tra­nsmission and distribution assets, al­ong with ancillary servic­es”. The objectives of these guidelines are to fa­cilitate the procurement of BESSs, as part of individual renewable po­­wer projects or separately, to address variability, firm up power supply, increa­se energy output, extend the time of su­p­ply from renewable energy projects, augment existing renewable po­wer projects, and provide ancillary, grid support and flexibility services for the grid; en­able optimum utilisation of the transmission and distribution network; en­su­re transpa­rency and fairness in procurement pro­ce­sses and provide a framework for an intermediary procurer to act as an agg­re­gator, trading licensee, im­p­le­­menting ag­ency for interstate/ intra-state sale and purchase of power; and provide standa­rdi­sation and uniformity in processes and a risk sharing fra­mework between various stakeholders involved in energy storage and storage capacity procurement, thereby en­cou­raging competition and enhancing the bankability of projects.

In accordance with the guidelines, energy can be procured from a BESS through com­petitive bidding for grid-connected projects to be set up on build-own-operate or build-own-operate-transfer basis. The minimum project size and bid ca­pacity requirement for intra-state projects has been fixed at 1 MW while that for interstate projects is fixed at 50 MW. The guidelines are applicable to and binding on the BESS developer, procurer, intermediary procurer, end-procurer and implementing agency.

Eight key business cases have been identified for the utilisation of BESSs in en­ergy supply and grid maintenance. Th­e­­se include:

  • Renewable energy supply with BESS as part of the renewable energy proje­ct. The ownership of the renewable energy and BESS assets lies with the generator. These projects may also be utilised to meet the peak power and firm de­spatchable renewable power require­me­nts of procurers.
  • The use of BESS as a grid element is ai­med at maximising the use of the tra­nsmission system, strengthening gr­id stability and saving on investment in the augmentation of transmission in­fra­structure.
  • A BESS, with a fast ramp rate, is particularly suited for second-by-second management of interchange flows and therefore serves as an asset for balancing ser­vices and flexible operation. System op­­­e­rators, such as the Natio­nal Load De­­­s­­­patch Centre, regional load de­s­pa­tch centres and state load des­patch centres, may use BESSs for frequency control and balancing services to manage the inherent uncertai­nty/ variations in load and generation.
  • The distribution business model aims to maximise the utilisation of the storage asset and strengthen discom ope­rations. BESSs may be connected at load centres to help discoms in pe­ak lo­ad management, grid resilien­ce, portfolio management and flexible operations. BESSs can also be utilised to facilitate la­­rge-scale expansion of electric mobility.
  • Standalone BESSs may be used for ar­bitrage operation by the develo­per/owner or by the lessee, including mer­chant op­eration.
  • The BESS developer/owner may sell storage space for a particular duration, in which case the developer will get ca­pacity charges.
  • In addition to the above models, procurers, in­termediary procurers, beneficiaries or generators may also come up with any other suitable business cases.
  • BESS developers may use a certain co­mponent of their project as merchant capacity and sell it in the power market as per extant regulations.

The guidelines will be applicable to all use ca­ses except the first one. For renewable energy projects with BESS as a single project (co-located or multi-located), the respective standard bi­d­ding guidelines issued for procurement of po­wer from so­lar, wind and hybrid power projects, or the unified standard bidding guidelines issu­ed by the MoP will be applicable.

For other cases, the guidelines detail the bidding process, structure and award of projects including aspects such as invitation of bids and project preparedness. The latter includes the conditions to be met by the procurer with res­pect to bid do­cu­mentation and site-related prepa­ra­­tory activities in case the site is specified by the procurer. The key documen­ta­tion re­quirements for meeting project milesto­nes for project sites selected by the BESS developer are also specified.

As per the guidelines, the procurer must prepare the bidding documents including the request for selection (RfS), the draft battery energy storage purchase ag­reement (between the BESS developer and procurer/intermediary procurer) and the draft battery storage sale agreement (bet­ween the BESS developer and in­termediate procurer). The procurer must call for single-stage, two-part (te­c­hnical and financial) bids. The technical bids will be op­ened first while the price bids of only tho­se who qualify in the technical bid evaluation (as per the eligibility criteria set out in the RfS) will be opened subsequently. The bidding pro­cess should be completed within three mo­nths of the date of issu­ance of the RfS. The minimum term of the battery energy storage purchase ag­ree­ment sh­ould be eight years from the date of project commissioning. The BESS developer is responsible for the safe disposal of all unit battery modules from the plant af­ter their end of life, in accordance with the extant government rules.

The way forward

Until now, much of the tender-related activity has been focused on the deployment of small-scale storage projects. However, recent months have witnessed a shift in this trend with projects anno­u­n­­ced for large-scale projects as well. For in­s­ta­n­ce, in January 2022, NTPC Rene­wable En­er­gy, a wholly owned subsi­di­ary of NTPC, iss­ued a request for proposal from developers to build interstate transmission system-connected energy storage systems with a capacity of 3,000 MWh and a minimum capacity of 500 MW anywhere in India. The energy storage installations are pla­nned to be used to meet its round-the-clock renewable energy requirement under the service model. This came after the company’s expression of interest (EoI) invitation in June 2021 to set up 1,000 MWh of grid-scale BESSs at a single NTPC location or split ac­ross multiple NTPC po­wer plants in In­dia. Fur­ther, in Oc­tober 2021, the Solar Energy Corporation of In­­dia ca­ll­ed for EoIs for the procurement of 1,000 MWh of BESSs as a pilot project.

There is a focus on not just deploying project capacity, but also scaling up manufacturing capabilities. To this end, the De­­part­ment of Hea­vy Industry (MHI) re­le­as­ed a detailed notification in June 2021 on the production-linked in­cen­tive (PLI) sc­heme, the National Pr­gramme on Ad­van­ced Chemistry Cell Battery Storage, for the im­plementation of giga-scale ACC ma­nufacturing facilities.

With an outlay of Rs 181 billion, this programme aims to achieve an ACC manufacturing capacity of 50 GWh. This was followed by a tender from the MHI to select manufacturers for setting up ACC production capacities for at least 50 GWh for energy storage under the PLI sc­heme, which was oversubscribed by 2.6 times with 130 GWh of capacity.  Re­li­­a­n­ce New Energy Solar, Hy­un­dai Gl­o­­bal Motors, Ola Ele­ctric Mobility, Lucas-TVS, Ma­­hindra & Mahin­dra, Amara Raja Batt­eries, Exi­de In­dus­tries, Rajesh Ex­ports, Larsen & Toubro, and the India Power Cor­po­ra­tion were among the 10 co­mpanies that filed bids for the tender. Fina­lly, in Ma­rch 2022, Reliance New En­ergy Solar Li­mi­ted, Ola Electric Mobility, Hyundai Global Mo­tors and Rajesh Ex­ports Limit­ed beca­me the four firms se­lected for the PLI sc­he­me for ACC ba­ttery storage. The selected companies will have to set up the manufacturing facility within a period of two years. The incentive on the sale of batte­ries manufactured in India will be disbu­r­sed thereafter over a period of five years.

Going forward, with the finalisation of the standard bidding guidelines for the procurement and utilisation of BESSs and successful tenders, the Indian energy storage market is ready to take off on a large scale and assist in meeting the country’s renewable energy goals.