Recommendations for energy storage in India, by Pradeep Saini (Research Intern) and Aradhana Gahlaut (Junior Analyst), IESA.
India’s energy sector has grown rapidly over the last year driven by policies, reforms and investments. Various policy initiatives such as introduction of UDAY, amendments in National Electricity Act, new solar RPO target for states, biofuel policy, small hydro policy, offshore wind policy and new hydrocarbon policy have all contributed to growth of the industry. However, there is still a long way to go with some persisting issues requiring attention and resolution at the earliest, making the upcoming budget crucial to the energy sector.
The India Energy Storage Alliance (IESA) took into account the industry’s views and along with its research-backed opinion, compiled a list of recommendations for Union Budget 2017-18 to foster rapid growth of the energy storage industry in India. Renewable energy integration with storage has been on the radar for the last few years and MNRE allocated Rs 18 crore towards R&D and implementation of schemes related to energy storage in the RE sector in 2016. This allocation needs to be enhanced significantly under the 2017-
18 Budget to foster innovation in energy storage research. In the existing structure, basic import duty is currently 10% on Lithium ion cells, leading to importing Li-ion batteries being expensive. This requires that import duty on the cell should be waived off completely or at least reduced to encourage the manufacturing of Lithium ion batteries in India. This should go hand in hand with the introduction of excise duty and local tax exemption on local assembly of Lithium ion packs. The government has successfully aided solar project in the past and similar to that, there should be an Accelerated Depreciation of up to 80% on energy storage projects to reduce the tax burden. The government should also provide a tax rebate on purchase of BMS, charge controllers, solar inverters, UPS and power electronic equipment along with incentives for setting-up of manufacturing clusters. Keeping up with environment-conscious trends, it is time carbon credits and any other incentives applicable for Green Energy promotion must be introduced.
The nascent electric vehicle market in India has started gaining momentum once again. The industry is expecting long-term support from the government to push EV’s at a large scale in India but certain changes are required for mass adoption of EV’s in India and also to achieve the ambitious target set by the government of India under NEMMP 2020 of having 6-7 million EV’s on road by 2020. The Government of India launched the FAME India scheme in 2015 for two years which is ending on 31st March 2017. FAME India should be extended for at least five years to facilitate the EV market in India and should be made applicable in all states. E-cycles should also be included in the FAME scheme. EV manufacturing should be encouraged with 0% BCD instead of subsidies. Removing custom duties for a few years would encourage EV’s to become main-stream. Not forgetting public transport, anti-dumping duty must be imposed on the import of low grade e-rickshaws to protect the indigenous industry of e-rickshaw manufacturing in India. The government should also reduce the high import duty (~30%) on electric buses for a period of 3-5 years within which the domestic manufacturing of EV’s is expected to commence. There should be a greater focus on the development of charging infrastructure and provision of at least 20-30% subsidy of the cost of the charging infrastructure. Greater investment is required in the R&D sector to attract sophisticated technologies for EV’s. The US provides a tax credit for the purchase of a new qualified plug-in electric drive vehicle motor that draws propulsion using a traction battery that has at least five kWh of capacity, uses an external source of energy to recharge the battery and meets specific emission standards. The minimum credit amount is $2500 and the credit may be up to $7500 based on each vehicle traction battery capacity. This can be referred to and implemented keeping Indian conditions in mind to encourage the storage market in our country.
Various industry experts have stated their expectations and are now keenly waiting for the government to invigorate economic policy and direction amidst all the uncertainty and political influence. Tata Power expects a stronger focus on solar in the budget with emphasis on manufacturing and distributed power generation. Delta India Electronics intends to start Lithium ion battery manufacturing in the country for which they suggest a reduction in import duty on the cell in order to boost energy industry in India, which will further encourage ‘Make in India’. Mumbai-based CNC service provider, Vision Mechatronics, voices their concerns over present excise and custom duty and hope for exemption and/or reduction. Dhivik Reddy of GoGreenBOV expresses the electric vehicle industry’s recommendation of 0% BCD for the initial years instead of subsidies to encourage EV manufacturing.
The government has been demonstrating a strong vision for the energy and renewables sector that includes energy security, clean energy and affordable power for all. It is important to learn from past mistakes and adopt a more hands-on approach to resolution of pending issues. India is emerging as a leader in sustainable power and has garnered great international interest. All eyes are on us as we aim to translate words into actions and increase momentum to enforce reforms for more sustainable and comprehensive growth.