India ready for billions of dollars in battery subsidies

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India’s government is drawing up a new multibillion-dollar subsidy scheme for companies making power grid batteries, according to a proposal seen by the Financial Times, as authorities seek to accelerate the transition of big coal consumers to clean energy .

Prime Minister Narendra Modi has set an ambitious target of building 500 gigawatts of renewable capacity by the end of the decade as India, one of the world’s fastest-growing energy consumers, tries to move away from coal. Fossil fuels currently account for about three-quarters of the country’s electricity generation.

Batteries are essential for storing renewable energy because, unlike regular power supplies generated by coal plants, solar and wind availability fluctuates throughout the day.

The draft proposal for a production-linked incentive subsidy scheme would offer ₹216 billion ($2.6 billion) from this year to 2030 for companies to set up manufacturing capacity for 50 gigawatt hours of battery cells in India. The plan submitted by India’s Ministry of Power is under discussion and subject to change. The ministry did not respond to a request for comment.

For Indian officials, more domestic battery cell manufacturing is essential, not only for the energy transition but also to reduce dependence on battery imports from rival China. At least 90 per cent of the value is to be generated domestically under the plan, such as sourcing components locally instead of importing.

“If India does not take immediate steps to set up local manufacturing capacity of BESS (Battery Energy Storage Systems), our energy transition imperative will lead to huge imports from China,” the document said.

India has resisted pressure to phase out coal, but officials say building new coal-fired power plants is a necessary option to reduce the cost of battery storage.

The draft plan acknowledged that there is a limit to how much coal power India can build. Issues including “international opinion” and “environmental concerns”. , , Expansion of coal-based thermal generation beyond a point is an unviable option”, it said.

India has launched a series of subsidy schemes to promote domestic manufacturing in strategic industries such as solar modules and semiconductors. Most are still in the early stages.

Planned production under an existing subsidy scheme for advanced chemistry cell battery storage will primarily supply electric vehicles rather than the grid.

India’s power and renewable energy minister Raj Kumar Singh told the FT this month that more subsidies are needed to encourage manufacturing of batteries for the electricity grid.

“Our need for storage is going to be enormous,” he said, adding that for investors, “we will continue to be the most attractive market for renewable energy in the world”, including storage.

According to another official, the government is also planning funding of about $500 million to cover the “viability gap” for companies investing in the sector, given that it remains high-risk.

Jagbanta Ningthoujam, head of the India practice at think-tank RMI, said that although the cost of batteries for the grid is currently “prohibitive”, the market has huge growth potential.

“There is a general agreement that you need to increase battery demand,” he said. “To do that, you have to create a lot of regulations that are not in place yet (and) a lot of market building Need to try.”