Battery Energy Vs Pumped Hydro: Analysing India's Power Storage System Contenders
While pumped hydro storage projects score better on tariff competitiveness and storage duration over battery energy storage systems, execution challenges remain high for the former.
India is rapidly expanding its renewable energy capacity, with a current target of 500 gigawatts by 2030. On the backdrop of this ambitious goal, battery energy storage systems and pumped storage hydro systems are crucial in order to solve the intermittency problem of sources like wind and solar, which cannot generate power 24/7.
Both these energy storage solutions can store excess energy generated during peak production times and release it when needed, ensuring a more reliable and constant power supply.
Both storage systems have their pros and cons, so let's break it down.
The Energy Storage Contenders
Battery Energy Storage System and Pumped Storage Hydro are the top contenders for grid energy storage, especially for renewables like solar and wind, but they operate on different principles.
BESS uses large batteries for storing electrical energy, allowing rapid charging and discharging, while PSP utilises natural reservoirs at varying elevations. During periods of low demand, surplus electricity pumps water uphill to store energy. When electricity is needed, water flows downhill through turbines to generate power.
Battery energy storage systems have a storage of 2-4 hours per day, while PSP Hydro has a storage of 6-8 hours per day.
Better Tariffs
The central government and state electricity distribution companies are seeking bids for standalone storage systems, specifying technologies like BESS and PSP or leaving the choice to the bidder, according to ICRA Research.
Initially, bids from August 2022 to March 2023 averaged higher tariffs, around Rs 1.30-1.67 crore per megawatt per year. However, recent bids in Gujarat have seen significantly lower offers, as low as Rs 0.45 crore per megawatt per year, which ICRA Research noted as positive for the distribution companies. The feasibility of these bids, though, hinges on battery prices.
BESS Vs PSP Hydro: The Differences
Cost And Capex
Battery energy storage systems typically have higher upfront cost than pumped storage hydropower, but lower operational costs per kilowatt hour. As per ICRA, the capital cost for BESS stands at Rs 1.5-1.75 crore per megawatt hour versus Rs 1.0 crore per megawatt hour for PSP Hydro.
The levelised cost of storage for BESS stands at Rs 5.5-6 per unit based on prevailing costs, as compared to Rs 4.5-5 per unit for PSP Hydro. However, these costs could be further lower for BESS based on quoted tariff bids recently.
When we talk about replacement capex, BESS requires replacement capex, while PSP Hydro requires maintenance capex.
Project Life And Execution Timeline
As per ICRA, the project life of a battery energy storage system is linked with the number of charging or discharging cycles, while that of PSP Hydro is not.
BESS have a lower execution timeline 12-18 months, while PSP Hydro projects take more than four years, with a moderate-to-high risk of delays in construction.
Risks
As per ICRA, BESS and PSP Hydro have 'low' and 'moderate' operational risks, respectively.
In terms of execution risks, the risk for BESS stands 'low to moderate', while for PSP Hydro projects, the risk are 'high' on the back of the complexities involved in constructing upper and lower reservoirs required for the PSP system.
Advantages Of BESS
The cost of batteries account for a major portion in BESS. Thus, the decline in battery costs over the last decade has enabled a reduction in the cost of energy storage, as per ICRA Research.
Battery prices eased to an all-time low of $139 per kilowatt hour in 2023, led by the fall in raw material prices amid higher production, the ratings agency said.
ICRA Research also said that this cost is expected to further improve the cost economics for energy storage over the coming decade, likely driven by the scale-up of battery production capacity globally.
Advantages Of PSP Hydro
India has recognised Pumped Storage Hydro as a crucial element in achieving its ambitious renewable energy targets. As per the Central Electricity Authority, India has an estimated on-river pumped storage hydro potential of around 103 gigawatts.
The Ministry of Power introduced draft guidelines in April 2023, offering incentives like exemptions from stamp duty, concessional land rates, and relief in taxes to make PSP projects more financially attractive. The Central Electricity Authority has also implemented fast-tracked approval mechanisms to expedite the permitting process for PSP projects.
As of July 2024, Indian has an installed PSP capacity of approximately 4.75 GW, with around 44.5 GW of projects under various stages of development. The target set by the CEA in terms of capacity is 74 GW by 2032.
