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.
