India is going to need more battery storage than any other country for its ambitious renewables push

Batteries have emerged as a key technology for the transformation of electricity systems and the reduction of carbon emissions around the world. This is why the IEA’s World Energy Outlook 2020 series will include a special focus on batteries later this year.

Renewable energy sources are providing increasing amounts of the power supply in countries around the world – a crucial element in decarbonising the electricity sector, which accounts for almost 40% of global CO₂ emissions. As the share of variable renewables such as wind and solar PV grows, electricity systems need to become increasingly flexible in order to respond effectively to changes in supply and demand.

With ambitious plans to use renewables – particularly solar PV – to satisfy rapidly increasing electricity demand, India will be the country with the greatest need for additional flexibility in the coming decades, according to IEA analysis. In 2018, India’s investment in solar PV was greater than in all fossil fuel sources of electricity generation combined.

Batteries are ideally suited to meet these rising flexibility needs. Over the next two decades, global growth in batteries is set to outstrip that of any other flexibility option available to electricity systems, according to the World Energy Outlook 2019. Batteries have other advantages, too. They increase the value and competitiveness of solar PV by storing the electricity produced during sunny periods and feeding it back to the grid at another time. Battery storage, coupled with solar PV, also appears to be one of the most cost-effective ways of helping provide affordable electricity to isolated communities.

Batteries are of course useful in many other areas besides power systems – such as electric cars – and this has been vital in bringing down the costs of battery manufacturing. Battery costs have fallen by over 80% since 2010 thanks to technology improvements across a range of applications. In 2018, around 70 gigawatt-hours (GWh) of battery cells were used for electric cars worldwide, while 8 GWh of stationary batteries were added to provide flexibility in the power sector.

China, the European Union and the United States are the three biggest markets for electric car sales. Those regions, together with Korea and Australia, are also propelling the growth of batteries in the power sector. Battery manufacturing capacity keeps increasing, led by China (over 60% of the total) followed by the United States, Korea, Europe and Japan (less than 10% each).

Global battery production is expected to increase 20-fold by 2040 under today’s stated policies, driven by rising sales of electric vehicles. Most of the advances leading to battery cost declines have occurred and are expected to occur through the deployment of electric vehicles. Under stated policies, the World Energy Outlook 2019 projects the number of electric cars to grow from 5 million in 2018 to 330 million in 2040. Battery deployment in cars and other means of transport (bikes, scooters, etc.) creates spillover effects for stationary battery storage systems, helping to cut their costs further by 2040.

Increasing deployment of variable renewables and changes in electricity demand patterns will double the global need to source power system flexibility, including from batteries. Under stated policies, renewables make up two-thirds of all additions to global power generation capacity through 2040, and solar PV becomes the largest source of installed capacity around 2035. These trends will drive a significant increase in the use of battery storage, led by India, which is projected to account for more than one-third of total deployment by 2040. However, in this scenario, CO₂ emissions from the power sector remain stubbornly high around current levels of 13.8 billion tonnes and the sector remains one of the biggest sources of air pollution, especially in Asia.

If the costs of battery storage systems were to fall below one-third of today’s level, investment decisions in new power capacity would change considerably, especially in India. Coupling solar PV with affordable batteries offers an attractive means to provide electricity and flexibility in India. This combination would become competitive with new coal power plants in the near future and enable the deployment of larger amounts of cost-effective solar PV.

In this “Cheap Battery Case,” power generation capacity from coal could plateau in the 2030s without compromising system reliability or the affordability of electricity. In India alone, solar PV capacity could reach 800 GW by 2040. This would ultimately result in India’s power-related CO₂ emissions starting to decline just after 2030 and would also reduce outdoor air pollution, which causes more than half a million premature deaths each year in the country.

For the “Cheap Battery Case” to happen, battery system costs would need to decline much more quickly than the recent pace of cost reductions. This would be possible if improved battery chemistries enter the market, further lowering the floor costs of batteries. Also, economies of scale in manufacturing and learning-by-doing would be essential to further drive down costs.

Falling costs are a necessary condition for the widespread market-driven deployment of battery storage – but they are not sufficient on their own. Electricity market reforms rewarding the speed, accuracy and precision of battery storage systems would help their business case, and are crucial to incentivise investment.