Battery storage manufacturing in India: A strategic perspective
There is a need for a strategic approach to battery manufacturing in India, including not only broad directional measures but also specific actions.
India is one of the few countries with a Nationally Determined Commitment (NDC) that is consistent with the 2-degree Celsius emission goal set under the 2015 Paris Agreement. Some of the major milestones under India's NDC are the country's renewable energy targets of 175GW by 2020 and renewable energy (RE) as 40 percent of installed power generation capacity by 2030. India has set a similarly ambitious target for electric vehicles: that is to have 30 percent of all vehicles to be EVs by 2030.
However, RE generation is typically not only variable and intermittent but also inflexible in nature. Given the predominantly inflexible nature of the Indian power grid due to high reliance on coal-based generation and lack of gas-based generation, higher renewable penetration under India's NDC will likely result in requirements of various flexible technologies.
One such technology gaining momentum globally is battery energy storage, specifically lithium-ion batteries. This is mainly attributed to the rising demand for battery-powered EVs globally. According to an estimate, energy storage global demand is projected to rise 17GWh in 2018 to 2,850GWh by 2040 with India emerging as the third largest market, given applications to both RE and EV.
This emerging market potential has motivated Indian policymakers to consider developing India into a global manufacturing hub for battery storage. However, this motivates us to ask questions such as: What is the minimum set of barriers India must overcome to develop domestic manufacturing competencies around new battery storage technologies? What are the different factors policymakers should consider for allowing successful deployment of battery storage technologies? Here, we focus on the first question.
Developing battery manufacturing competencies in India would require a strategic perspective. To prescribe that we first we first need to identify the various pathways India could potentially embark on. We find that there are mainly two approaches that have been successfully adopted by various countries: one, a research-focused approach or the top-down approach; and two, a manufacturing focused approach or the bottom-up approach.
The top-down approach comprises the country first developing the necessary knowledgebase through investment in research and development. This is then followed by commercialization of technology and development of full-fledged manufacturing prowess. Conversely, the bottom-up approach involves the country capturing the market share initially through development of manufacturing competency, followed by moving up the value chain to more research intense activities.
Given India's limited experience in developing new generation battery technologies (such as lithium-ion) and its late arrival in the industry, the bottom-up approach may be more appropriate. With this as the basis, we develop and verify a critical barrier framework which highlights the minimum set of barriers that need to be overcome for obtaining industrial competency in battery storage.
The framework can be built by combining learnings from two diverse strands of literature – namely industrial science and management science. Specifically, we assess multiple literature on industrial catch-up, and Porter's Diamond Theory of National Advantages. While the literature on industrial catch-up dictates the general approach for our framework, its critical elements are identified from Porter's theory. Within this framework, we identify three main barriers:
(1) Getting to Scale
(2) Infrastructure and Resources
(3) Global Competitiveness
We posit that industrial competency can only be achieved when all these barriers have been overcome. The critical barrier framework is verified by case study research method. We test the framework across various successful and struggling industries such as the Indian Automobile Industry, Indian Pharmaceutical Industry, Chinese Solar PV Industry, United States Solar PV industry, and the Indian Solar PV Industry. From these cases studies, we find that all the three barriers have been overcome by successful industries whereas at least one of the barriers from our framework has not been overcome by the struggling industries.
Boosting domestic demand
The is a need to focus on boosting domestic demand and developing global competence.Based on findings, it is suggested that Indian policymakers start by developing demand-side policies with an emphasis on protection to domestic manufacturers from foreign competition. Once domestic manufacturers achieve economies of scale through capturing domestic as well as international demand, Indian policymakers may allow foreign competition within the country. This will result in increased market efficiencies, thereby making domestic manufacturing globally competitive. In this context, while any short-term infrastructure and resource requirements can be met by the industry, policymakers should also invest in them parallelly to further bolster them. Further, they should also consider developing policies that promote research and development early on since this would be crucial for the growth of any manufacturing industry in the long-term.
Based on worldwide best practices, and reflecting on early feedback from government officials, the following measures could provide guidance on the broader recommendations mentioned earlier.
First, for boosting domestic demand, the measures may include:
- Setting targets, both EVs (e.g., as in China, CA) and power related (e.g., as in CA)
- Removing administrative barriers to storage deployment
- Helping set up adequate charging infrastructure for EVs
- It is also found that subsidies may not be required for EVs; however enabling business models and financing mechanisms would be key.
Second, protectionist measures may include:
- Ensuring government (especially EV) demand is met through domestic manufacturing (e.g., as in the US, China)
- Ensuring (e.g., >50 percent domestic content requirement on all sales (e.g., as in Malaysia and Indonesia)
- Imposing import tariffs on foreign goods – e.g., batteries (e.g. as in the US), EVs (e.g., as in India)
Third, for developing self-reliance, the measures may include:
- Ensuring basic R&D (and education) is supported (e.g., as in the EU)
- Enabling technology transfers via partnerships (e.g. as in the US)
- Providing adequate infrastructure.
To conclude, India has set ambitious targets for RE and EVs; getting to these targets would critically depend on developing self-reliance on battery manufacturing. Throughout research, we have identified the need for a strategic approach to battery manufacturing; not only broad directional measures, but also specific actions. It is hoped that the Indian policymakers would consider these insights in India's journey towards becoming self-reliant in battery manufacturing.
(The views expressed in this article are the author's own.)