Decarbonization Opportunities — Seedlings in India
I wrote about the need to develop domestic energy storage manufacturing in India in 2018, which now seems like ages ago. Some of the recent policy actions in the country and key industry moves tend to portray what opportunities might lie ahead as the country decarbonizes.
The flurry of actions over the past few months indicate that the foundations for that future are being laid, from energy storage, solar, hydrogen, to oceans.
One of the recent policy actions has geared towards domestic battery production. The country announced a $2.46B National Programme on Advanced Chemistry Cell (ACC) to encourage local production, with a goal of having 50 GWh manufacturing capacity. While a commendable start, I’d suggest a lot that needs to be done and create India ATL (ITAL). To put it in perspective, the current capacity of lithium-ion battery plants is 755 GWh globally, and projected to increase to 3.4 TWh by 2030 driven by 200 giga factories, 148 of which will be located in China. Similarly, the opportunities for battery recycling and access to battery raw materials need to be further captured.
India also has a goal of 450GW of renewable energy generation by 2030. However, the domestic manufacturing capacity of solar cells and modules is 3GW and 15 GW, respectively. As a result, India currently imports 4 of every 5 solar cells and modules, primarily from China. In the recent Central budget, to encourage domestic production in the country, government announced Rs 1,000 Crore (~$135MM) for Solar Energy Corporation of India and Rs 1,500 Crore for Indian Renewable Energy Development Agency. It’s also expected that the country will impose 40% basic customs duty on solar modules and 25% on solar cells from 1 April 2022. Having seen a similar movie when I was working at SunPower and facing competition from Chinese manufacturers, it will become even more important to focus on product differentiation, aggressive cost declines across the value chain, and delighting the customers.
The third prong of policy action is green hydrogen. While still nascent, India proposed common standards for green hydrogen at the recent BRICS (Brazil, Russia, India, China, and South Africa) summit. There is also an accommodation for Production Linked Incentives (PLI) for manufacturing electrolyzers locally. Hydrogen energy mission is also called out in the Central budget. To achieve net zero by 2060, it’s estimated that India will need 40 MM tons of hydrogen, particularly as several hard to decarbonize sectors (e.g. ammonia production, steel manufacturing) decarbonize. Like batteries, solar modules, the cost of green hydrogen will be important to drive customer adoption. In the US, Hydrogen Shot has a target of $1 per kg by 2030 (vs ~$6 per kg today). A cost goal along these lines will be important too.
With this backdrop, it’s not a surprise that one of the largest companies in India, Reliance, is making a bold commitment to technologies from solar, energy storage, fuel cells, and green hydrogen (coincidentally all four of which I have had the pleasure of working in). The company, in addition to setting the net zero goal by 2035, also committed $10.1B in the next 3 years to set up giga factories in each of these areas, which given the history of the company is not surprising. Scale matters! Equally important is ~$2 B of this capital is ear-marked for the partnerships in the value chain for renewable energy businesses. With the focus on integrated approach, from ingots, wafers, cells, to modules, for example in solar; access to innovative technologies to drive better economies will be important. Interestingly, within a few days of the announcement, Reliance announced the intent to acquire the REC Group with the annual solar production capacity of 1.6 GW. I think we’re just getting started. On the other end of the spectrum are the innovative startups. Because of my relationships in the innovation ecosystem and IITStartups, one of the homegrown startups from my alma mater is Virya Batteries, which is developing an innovative battery that is projected to be lower cost and much safer. I think we’ll need many companies like Virya to help India achieve it’s decarbonization goal.
The problem of climate change is global, and it’s heartwarming to see a few of these developments in India. We need many more of these and all the stakeholders to have a serious shot of making a dent on this problem. Let’s go!
