ACC Push: These Four Companies Will Get PLI Incentives To Boost Local Battery Cell Production

The Union government has selected four companies for incentives under production-linked incentive (PLI) scheme for advanced chemistry cell (ACC) battery storage. This includes Reliance New Energy Solar Limited, Ola Electric Mobility Private Limited, Hyundai Global Motors Company Limited and Rajesh Exports Limited.

According to the Ministry of Heavy Industries (MHI), the selected firms will receive incentives under India’s Rs 18,100 crore programme to boost local battery cell production.

What Is ACC

ACCs are the new generation advanced energy storage technologies that can store electric energy either as electrochemical or as chemical energy and convert it back to electric energy as and when required.

These technologies include Lithium-ion (Li-ion) cells and chemistries better than Li-ion available at commercial scale such as sodium ion, zinc air, flow batteries etc. The new ACC battery technologies could potentially enable battery storage ecosystems to diversify away from the established Li-ion formula and scale up the viability threshold, thus offering an array of potential options to policymakers.

These technologies are useful for renewable integration, power backup, diesel minimisation, electric vehicles — not just on roads but for drones, electric planes, marine applications — and consumer electronics devices such as cell phones.

User Case

Energy storage systems (ESS) has reach and leverage across numerous sectors of economy. ACC battery cells are going to be the mainstay of such systems.

However, electric mobility is expected to be a primary driver of demand for energy storage in India and globally. The majority share of global battery sales has shifted from consumer electronics to electric vehicles (EVs) over the past five years, with nearly 54 per cent of global advanced battery sales going to the EV segment between 2015 and 2019.

Beyond the expected growth in EVs, the stationary energy storage market is slated to experience significant growth as the need for grid flexibility will rise to integrate 500 GW of non-fossil fuel energy on the grid by 2030.

The next phase of energy transition, driven by the large-scale deployment of variable renewable energy sources (VRES) like solar and wind power, can be fully realised by key technologies of energy storage. The grid integration challenges of the intermittent generation sources ensuring quality of supply on a real time basis along with the capability to store excess electricity over different time horizons (minutes, days, weeks) can be achieved by the electricity storage systems.

Beyond flexibility and renewable integration, batteries will also be in demand for applications like distribution and transmission upgrade deferral, commercial and residential behind-the-meter, diesel generator set replacement, and ancillary services.

Additional demand for batteries is also expected to come from the consumer electronics sector with India Cellular and Electronics Association (ICEA) forecasting an annual demand of 18 GWh for mobile phones and power banks by 2025. Market growth in the consumer electronics sector is largely attributed to the growth in sales of mobile phones and power banks, increasing from annual sales of 300 million devices today to 1.2 billion devices annually by 2030. Additional demand from the consumer electronics sector includes Internet of Things (IoT) devices and telecom towers.

Indigenous Push

Globally, manufacturers are investing in these new generation technologies at commercial scale to fill the expected boom in battery demand through 2030.

Despite their significant value proposition, however, India is currently largely reliant on imports of ACCs from other countries, particularly from China and Taiwan and has a negligible presence in the global supply chain for manufacturing of ACCs technologies. Advanced batteries are a cornerstone technology, and their manufacturing within India could allow domestically sourced batteries to cater to the demand generated from EVs, grid storage applications, consumer electronics, and other uses.

Keeping in mind that the development of a domestic battery manufacturing ecosystem is essential to meet future energy storage market needs and would help reduce dependence on imports, the government has embarked on a national mission for cells.

Demand Projection

A NITI Aayog study in association with RMI India has estimated that India's future demand for batteries under two scenarios: an “accelerated” scenario and a “conservative” scenario.

The conservative scenario assumes battery demand rises in line with the most conservative expert forecasts. In the accelerated scenario, battery demand rises in line with expected success of India’s ambitions and incentives around vehicle electrification and attempts at grid decarbonisation.

Across a scale of conservative to accelerated cases, the report finds 106 GWh to 260 GWh of annual demand for batteries by 2030, respectively. Electric vehicles, including freight, are expected to drive approximately 40 per cent of this demand. The accelerated case scenario would require nearly 26 Gigafactories with an average advanced battery production capacity of 10 GWh per year. The conservative scenario battery demand would require 10 Gigafactories by 2030.

In common parlance, a Gigafactory represents a battery-production facility that’s gigantic in scale and brings multiple companies and components together to scale up lithium-ion battery production at an unprecedented level. Instead of kilowatt-hours (the unit used to measure a battery’s capacity) or megawatt-hours, manufacturers have to consider gigawatt-hours, to supply the level of energy they will need.

The term was coined by Tesla chief executive officer Elon Musk, back in 2013, for the then-upcoming lithium-ion battery manufacturing facility in Nevada. Tesla claims that the factory gets its name from the word ‘Giga’ which represents a ‘billion’”.

The expected surge in demand indicates both opportunity and criticality for India to emerge as a major global hub for advanced cell manufacturing. The recently announced PLI scheme is a first of its kind incentive initiative by the government to promote ‘Make in India’ and to attract global investments into setting-up of ‘Gigafactories’ in India.

Origin Of The PLI Scheme

Considering the emphasis on transition to a clean energy economy, the government of India in March 2019 had launched the National Mission on Transformative Mobility and Battery Storage under the chairmanship of the CEO, NITI Aayog. The mission, apart from notifying various policy interventions to promote EV penetration in India, had proposed the National Programme on Advance Chemistry Cell Battery Storage to support 50 GWh of domestic ACC manufacturing.

The Union Budget 2019-20 had also reaffirmed government’s intent to extend incentives and invite domestic and global companies through a transparent competitive bidding mechanism to set-up mega-manufacturing plants in sunrise and advance technology areas such as Lithium Storage Batteries etc, in order to boost the overall economic growth and promote ‘Make in India’.

Pursuant to this, the government on 12 May 2021 approved the Production Linked Incentive (PLI) Scheme 'National Programme on Advanced Chemistry Cell (ACC) Battery Storage’ for achieving a competitive ACC battery manufacturing capacity of 50 GWh with a budgetary outlay of Rs 18,100 crore.

A total of 10 companies submitted their bids under the scheme for which the request for proposal (RFP) was released by the Ministry of Heavy Industries (MHI) on 22 October 2021. All the 10 bids were evaluated and nine companies were found responsive and meeting the conditions of eligibility as per the requirements under the RFP.

Final evaluation of the selected bidders was carried out as per quality and cost-based selection (QCBS) mechanism and the bidders were ranked on the basis of their combined technical and financial score. The ACC capacities have been allocated in order of their rank, till a cumulative capacity of 50 GWh per year.

The five firms that unsuccessfully bid for the scheme — Mahindra & Mahindra, Larsen & Toubro, Amara Raja Batteries, India Power Corp and Exide Industries — are placed under a waiting list.

“India has the strongest government support for electrification in the whole world! Excited to be selected for the PLI scheme for manufacturing world class cells in India. Today, 90 per cent of global capacity is in China. We will reverse that and make India a global hub for EVs and cell tech,” tweeted Bhavish Aggwarwal, co-founder and CEO, Ola Cabs, one of the four shortlisted firms.

Key Features

The scheme envisages setting up of a cumulative ACC manufacturing capacity of 50 GWh for ACCs and an additional cumulative capacity of 5 GWh for niche ACC technologies.

The programme is designed in such a manner that it is technology agnostic. The selected firm shall be free to choose suitable advanced technology and the corresponding plant and machinery, raw material and other intermediate goods for setting up cell manufacturing facilities to cater to any application.

Incentives will be offered only to the selected firms. The incentive amount will increase with increased specific energy density and cycles and increased local value addition.

Each selected ACC battery storage manufacturer has to set-up an ACC manufacturing facility of minimum 5 GWh capacity within a period of 2 years. The subsidy will be disbursed thereafter over a period of five years. The total annual cash subsidy to be disbursed by the government has been capped at 20GWh per selected firm.

Furthermore, the selected firms have to achieve a domestic value addition of at least 25 per cent and incur the mandatory investment of Rs 225 crore /GWh within two years and raise it to 60 per cent domestic value addition within five years.

Benefits Envisaged

Besides setting up a cumulative 50 GWh of ACC manufacturing facilities in India, the programme is expected to attract a direct investment of around Rs 45,000 crore in ACC Battery storage manufacturing projects and import substitution of around Rs 20,000 crore every year.

Domestic manufacturing may decrease prices, create a manufacturing ecosystem in the sector, and facilitate demand creation for battery storage in India for both EVs and stationary storage.

The manufacturing of ACCs will also facilitate demand for EVs. As India pursues an ambitious renewable energy agenda, the ACC programme will be a key contributing factor to reduce India's Greenhouse Gas (GHG) emissions which will be in line with India's commitment to combat climate change.

The programme is also expected to bring in net savings of Rs 200,000 crore to Rs 250,000 crore on account of oil import bill reduction during the period of the programme due to EV adoption as ACCs manufactured under the programme is expected to accelerate EV adoption.

This PLI scheme for advanced chemistry cell along with the already launched PLI scheme for automotive sector and faster adaption of manufacturing of electric vehicles (FAME) will enable India to leapfrog from traditional fossil fuel-based automobile transportation system to environmentally cleaner, sustainable, advanced and more efficient EV-based system.