Tracing the rising demand for Lithium Ion Batteries and exploring avenues to ramp up their indigenous manufacturing

Lithium ion batteries are fast gaining ground in India, especially with fast plummeting battery prices and emergence of new sectors such as electric mobility. The demand for Lithium Ion Batteries in the coming years is set to be driven by three sectors that are becoming important in the present context: Battery Storage, Electric Mobility and Solar Based Home System.

There is an enormous potential for battery storage of around 1000 GWh in these three sectors, which is almost 50% of the world manufacturing capacity. If the demand in these three sectors is stimulated and regulatory measures like Phased Manufacturing Programme (PMP) and/or Preferential Market Access (PMA) are linked to the demand, domestic manufacturing could be encouraged. Energy storage is a crucial tool for enabling the effective integration of renewable energy and unlocking the benefits of local generation and a clean, resilient energy supply. India Energy Storage Alliance (IESA) estimates the market for energy storage would grow to over 300 GWh till 2025 and would need an investment of $3 billion (Rs.22, 000 crore). At present, over 1 GWh of annual assembling capacity is being set up for converting imported Li-ion cells into battery modules by various Indian companies. Energy storage will be needed for a host of services including ancillary services, Demand Response, battery storage, efficient management of the grid etc., which are necessary for stabilisation of grid as renewable energy integration increases. As per CERC report on spinning reserve, it is estimated that the need for primary ancillary services will be around 4000 MW in the next 5 years, most of which could come from battery storage. This will result in a demand of batteries of 300 GWh. 

India aims to electrify 30% of the total vehicle fleet by 2030. The development of less costly, durable EV traction batteries, with improved energy storage, power performance and charging capabilities, is essential for the successful transition towards e-mobility. The development of batteries for stationary applications can benefit from automotive sector achievements. With the assumption that the average battery storage in EVs is 17 kWh at present, rising to 30 kWh for cars, 2 kWh for two wheelers, 10 kWh for three wheelers and 100 kWh for buses, the expected demand for batteries will be 200 GWh.

There are about 25 crore households in the country which can potentially use solar based induction cooking as a clean and affordable source of cooking. Such transformation will reduce the dependence of households on availability and price volatility of fossil fuels like LPG, kerosene. This would also avoid annual subsidies that the government provides on LPG cylinders, to the tune of Rs. 45,720 crores and Rs. 11,500 cores for kerosene and would enhance energy security and saving of foreign exchange. Solar based induction cooking, while being capital intensive, does not need any recurring expenditure as the solar panel and batteries are owned by households. Promoting solar based induction cooking would also lead to a significant demand of lithium ion batteries in India of 500 GWh, which will attract international players and promote domestic manufacturing which will drive down the cost.

The cumulative demand for Lithium Ion Battery that can be generated by the three sectors in the next 5 to 10 years is estimated to be 1000 GWh. At present there is only one manufacturer who is setting up battery assembly plant which will later be converted into a cell manufacturing in Gujarat (Exide in collaboration with Leclanche). Given the significant market demand for batteries, the following steps may be taken to encourage domestic manufacturing of batteries in India. The first potential measure is the Phased Manufacturing Programme (PMP). Here, investments in all there sectors could come with a condition for PMP with a mandate that domestic content will increase over time to provide incentive to manufacture batteries in India. The second measure is the creation of Preferential Market Access (PMA). The Ministry of Information Technology has issued guidelines for PMA of up to 50% for domestically manufacturing electronic wafer and cells for all public procurement. A similar guideline could be issued for all battery procurements. This will enable a further decrease in the prices of energy storage in the country and also boost indigenous manufacturing.