NLC India Limited, a government of India owned coal mining company, recently completed auction for a 20 MW solar project integrated with 28 MWh storage capacity in Andaman & Nicobar Islands. This is the first utility scale storage tender in India to announce results. The tender includes provision of complete EPC and O&M services for twenty-five years. Mahindra Susten won the auction with a final all-in price of INR 2.99 bn (USD 46 mn).
- Replacement of diesel fired power is the most obvious application for solar cum storage plants both commercially and environmentally;
- Large variation in bid prices suggests inconsistent understanding of technical specification amongst bidders;
- Utility scale storage adoption in India is expected to be slow as DISCOMs are highly cost sensitive and lack awareness of its technological potential;
There have been four other utility scale storage tenders in India until now by Solar Energy Corporation of India (SECI) and NTPC in the states of Andhra Pradesh, Karnataka and Andaman & Nicobar Islands respectively. But all these tenders, with aggregate capacity of 35 MWh, have been scrapped without any reasons being given.
Andaman & Nicobar Islands is a group of islands in the Bay of Bengal with a total population of 400,000 and aggregate peak demand of 67 MW. The islands get their power mainly from diesel gensets and replacing them with integrated solar cum storage plants is highly desirable from an economic and environmental perspective. As seen in the US, Australia and elsewhere, replacement of diesel fired power is the most obvious application for solar cum storage plants. High cost of storage is not a deterrent because of the very high cost of diesel fired power of about INR 15/ kWh (USD 0.23).
The NLC tender has fairly stringent technical specification with performance warranties and associated penalties for full 25-year duration of the contract. Despite that, the auction received an enthusiastic response from players across the solar (Mahindra, Adani, Hero, Sterling & Wilson and Ujaas, amongst others) and storage (Exide, BHEL) spectrum. There was a huge variation in prices particularly for the EPC component – ranging from INR 1.79 bn for Mahindra Susten to INR 3.42 bn for Hero – suggesting inconsistent understanding of technical specification. SECI’s storage tenders have also faced this problem in the past with bidders struggling to interpret technical requirements.
It is encouraging to see this tender progress but as we stated in a recent note, India is doing very little to capture energy storage opportunity. The underlying problem is a mix of high cost sensitivity and lack of awareness about technical potential of storage. DISCOMs believe that they can use a mix of power cuts and curtailment to balance power demand and supply rather than committing to the use of expensive storage solutions. Our view is that storage will need 3-4 years of techno-commercial advancements before finding scale in India.