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1. India enters global race for giga
factories: IESA
On May 12, the Union Cabinet gave a final nod to the much-awaited
Production Linked Incentive (PLI) scheme for ACC battery storage, ETN
magazine interviewed Dr. Rahul Walawalkar, President of India Energy
Storage Alliance (IESA) to understand the journey that led to this milestone,
India's battery storage market, and the next steps Indian companies should
watch out for.
Q: IESA and your leadership have been at the forefront of accelerating
the adoption of energy storage and e-mobility in India, please tell us
about the journey so far.
A: The journey started back in 2010 when we started the India operations for
Customized Energy Solutions (CES). CES has been involved in shaping up

2. the US energy storage market through their own work as well as with the
Energy Storage Association (ESA) since 2004. When we started the India
operations, we realized that India presents a possibly bigger opportunity for
advanced energy storage technologies but there was a complete lack of
awareness about the technology, and all kinds of policy changes were
required to open up the market. So, in 2012 CES started India Energy
Storage Alliance (IESA) with the vision of creating awareness about
advanced energy storage technologies and creating a vibrant market for these
technologies in India.
Later in 2016, the IESA leadership circle suggested that based on the
learnings from the solar industry, where between 2012 to 2016 solar industry
had started to take off in a big way but there was hardly any manufacturing
happening and the government was considering putting some domestic
manufacturing under 'Make in India', so we thought: this is a good time.
Then, some of the early Gigafactories were starting up in China and Tesla
had just announced their Gigafactory plans for the US, so we started
exploring if we can have a similar giga factory plan for India.
We started with a modest target of setting the 10GWh power by 2020 as an
initial target and submitted a proposal to NITI Aayog in March 2016. So, it has
been a five-year journey since, and now the PLI has been approved but the
vision is much bigger under Mr. Amitabh Kant's leadership and the
government is now promoting manufacturing of 50GWh within 5-7 years.
Though this has taken slightly longer than expected, it is a great start and we
are not too far behind Europe in terms of starting this journey.
Q: The government has allocated INR18,100 crore for the ACC Battery
Storage manufacturing program, can you elaborate on how these funds
will be allocated?
A: The ACC program has evolved over the last two years. This is perhaps the
most studied and discussed program with all the stakeholders since it is the
first-ever scheme to be brought out by the NITI Aayog. The program is
designed for advanced chemistry cell battery manufacturing, therefore it is
limited to electrochemical storage technologies but within that, the program

3. allows all forms of electrochemical technologies that meet the criteria to be
eligible for the manufacturing incentive.
The program starts with technologies that have at least 50 watt-hours per kg
as energy density and goes up to technologies that have 350 watt-hours per
kg or more -- which are the latest generation technologies. The second
parameter considered is cycle life. It is also a very important parameter
because different applications require different cycles, and the program allows
for technologies that have 1000 cycles and it goes up to those having 10,000
cycles or greater. So, if you are lower on the energy density then it is expected
that to be eligible for the incentive program you need to at least have superior
cycle life or if you have the highest energy density then you can be eligible for
the incentive given with lower cycle life which is consistent with applications
such as consumer electronics or automotive where 1000 or maybe 1500
cycles are more than sufficient, but the energy density is very important.
Whereas for some of the stationary applications the energy density is not as
important, but cycle life is, as most of the utilities are looking for a 20 years
duration for financing these projects. Therefore, this is a perfect balance
where the government is not determining which technologies will get money
as long as the technology being manufactured can be set up at 5GW or higher
scale and meets the criteria.
This program is also linked to production, and unlike some of the earlier
programs, the government wants companies to take the technology risk and
make sure that they invest in technologies that are actually manufactured. The
companies will have to undergo testing for the products manufactured to
validate that they are meeting the criteria and depending on that they can get
anywhere from the base amount to almost two or two-and-a-half of the base
incentive amount if they can produce batteries superior in performance. There
is complete flexibility provided for testing and product manufacturing in this
program.
We are also happy that IESA was one of the key stakeholders who enabled
the program to be opened for more than 16 battery chemistries. The original
program was for EV applications and that would have limited the incentive to
3-4 electrochemical batteries but based on IESA intervention, NITI Aayog

4. expanded the scope and today 16+ battery chemistries are eligible to avail
of incentive in this program.
Another important development is that there is also a niche ACC program
where an additional 5GWh capacity is being allocated where individual
manufacturing could be 500MWh or possibly smaller, this could be very good
for attracting investment from some of the cutting-edge technology. These
were some of the recommendations put forth by IESA and we thank NITI
Aayog's Amitabh Kant and R B Gupta for considering them. This will now
enable us to attract both, investment in commercial-grade technology that
can compete with technology being manufactured in China, Korea, the US,
and the EU, and also to promote domestic R&D and attract international
early-stage companies to come in and set up plants in India which could lay
the foundation for next-generation giga factories in India.
Q: How many years has this program been planned for and how will the
funds be allocated?
A: The government has allocated is more than INR18,100 crore for the
program, there will be money allocated to related programs to support ACC
battery manufacturing including some funding to the Department of Science
and Technology (DST) for supporting R&D. But this money will be available
for the period of five years and that window starts in another couple of years.
So, it is expected that by the end of this month [May 2021] or early next month
RFP will be out for all the key stakeholders to review then the company will
have to 2-4 months to submit a detailed application. Once the application is
submitted there are two primary criteria on which the winners will be selected,
the scale of manufacturing and domestic value addition. Also, how fast
the domestic value addition will happen within the first five years of operation
of the facility.
So, if two companies are setting up the same size manufacturing plant then a
company that can localize more value in India will get a higher weightage
and there is a 20 percent weightage for the financial parameter, i.e. how less
subsidy you are asking from the government. So, the base amount of
incentive money is fixed at INR 2000 per kWh (roughly $25 per kWh) but it is

5. also capped at 20 percent of the cell price since it is expected that by the time
this manufacturing facility has come online the cell prices will be below $100
so in such case, the maximum amount of incentive which most of the
companies can get will be around $15 but that is still a big amount when you
are considering sub $100 cell price but that's one of the parameters based on
which the winners will be selected.
We are expecting more than 80GWh of bids to be submitted for the program,
in fact, if some of the international players also start participating then the bids
could go higher than 100GWh but based on the interaction of the IESA team
with the existing players in the market we are confident we will get 70-80GWh
of bids. Out of which, only 50GWh will be eligible for the incentive so there is
going to be an exciting competition during this phase.
After this, the winners have to submit every quarter the test results of the cells
which are produced to make sure which incentive bracket they fit in and they
need to submit GST invoices or some other proof that would show they were
able to sell those batteries in the market. They could even export it, those
successful in selling it internationally will also be eligible for the incentives.
NITI Aayog designed this program after consultation with several ministries
including the Department of Heavy Industries (DHI), Ministry of New &
Renewable Energy (MNRE), Ministry of Power (MoP), and several other
agencies including DST. DHI will serve as the implementing agency, and it
will be responsible for the distribution of the money. The entire process is
defined, including the testing criteria and all the other parameters. Most of the
players have this information available, if not, they can reach out to IESA and
we will be happy to help them in understanding the program.
Q: You mentioned that more than 80GWh of bids could be submitted for
the program, and if international players participate then the bids could
be above 100GWh. So, would Indian companies be able to license
technology from foreign partners?
A: This is an area where there is a lot of innovation taking place around the
globe. There are Indian companies who have now, for more than a year, been
in touch with technology partners and some of these companies have already
formed joint ventures or are finalizing license agreements for some of these

6. technologies. So, technologies are available, and in fact, every major
technology company is interested in India as a market--If we consider
countries, after China, and the US, India will be the third-largest market before
2030. If we include Europe as a market then India will be the fourth-largest
market. Therefore, no technology company can ignore India as a market.
IESA annual market assessment suggests that between now and 2027, the
cumulative market potential in the base case is 400GWh, and in terms of
the upper case, this potential could be more than 600GWh. This program is
quite an optimum size for meeting India's requirements. With this incentive
and some of the duties getting constituted under the Aatmanirbhar Bharat
(self-reliant India) initiative, it is almost a no-brainer that any tech company
that wants to get access to the Indian market will need to participate in the
ACC PLI program.
Q: As we are aware, ACC battery manufacturing requires heavy
investments, how will Indian companies get the necessary finance for
this?
A: This is an important question. Traditionally, Indian industries have been
comfortable with the assembling-kind of opportunity where you are not
investing in the core technology manufacturing, but essentially importing core
components and assembling them. That is how the auto industry, telecom,
and cell phone manufacturing is working.
But IESA strongly recommended working on building core technology in India
and thanks to the visionary leadership of PM Modi and CEO of NITI Aayog,
Amitabh Kant, we have realized we cannot keep making the same mistakes.
So the government has considered this in the PLI scheme.
If we see the way the PLI program is designed, we need to have at least 60
percent domestic value addition; the complete supply chain is looked after
in this program which is why the investment amount will be huge but ultimately
ACC battery cells are going to be the engine for industries for the next 15
years. These technologies are useful for renewable integration, power
backup, diesel minimization, electric vehicles -- not just on roads but drones,

7. electric planes, marine applications-- and consumer electronics devices such
as cell phones, etc. So, there are numerous applications, and we are at the
cusp of a technology transition that will dominate the industry for the next
20-30 years, possibly even longer.
The last battery technology to reach this scale was lead-acid batteries and
they dominated the world for more than 100 years. Although many new
technologies will come, companies that will set up facilities under this will have
a long commercial opportunity, and companies who invest in this can
consider 20 percent EBITDA (earnings before interest, taxes, depreciation,
and amortization), and if you consider the investment money they are getting,
then this can be greater than 25 percent. So, there is no better opportunity
than this for companies considering investing in ACC battery manufacturing.

8. Q: Advance chemistry cell requires critical raw materials like Lithium for
manufacturing Li-ion batteries, reports suggest India has limited
reserves of Lithium, so how will critical raw materials be secured for
indigenous facilities?
This again is a very important question. In fact, one of the concerns due to
which the ACC program got derailed by almost a year was because people
started to think that India does not have enough lithium reserves so we
should go for sodium or some other next-generation batteries.
However, people in the know were aware that in Li-ion batteries, the energy
exchange or ions that are getting exchanged are Lithium, but in terms of the
materials – Lithium amounts to less than 5 percent of the cost of the
material going into the Li-ion battery. Depending on the battery chemistry, it
could even be as low as 2-3 percent.
Therefore, depending on the battery chemistries, there are several minerals
required such as iron, copper, aluminum, phosphorous, nickel, manganese,
and cobalt. India already has reserved for many of these materials, the global
supply chain has also developed. For example, every country that is
manufacturing or setting up a giga factory does not have the domestic supply
for Li-ion battery manufacturing they rely on other countries which have
reserves. Ultimately this is a business decision if the supply chain needs to
be developed locally or they can take benefit of abundant reserves available
in Australia, or countries in Latin America. These countries have a very
well-developed mining sector and they are currently looking to partner with
Indian companies.
The Indian government has already set up a separate PSU, Khanij Bidesh
India Ltd. (KABIL) specifically to secure critical raw materials needed for
Indian industries. KABIL has already signed MoU and partnership agreements
with some of the international mining companies.
Apart from that, in India Lithium exploration was stopped until 2017, in fact,
IESA and some of the other stakeholders initiated the dialogue to allow
Lithium exploration which was only granted in 2018. Within the last two years,

9. initial deposits of Lithium have been found -- one in Karnataka and another
in the Eastern part of India – whether they are economical to be mined is
something that has to be decided but these things will develop. With the ACC
program mandating 60 percent domestic value addition, there is a big
opportunity to get raw materials from outside but if you can process them to
the purity and quality required for battery grade then there is tremendous
value addition available there. These are the kind of opportunities the Indian
companies need to focus on right now.
Another important aspect is, that in Li-ion batteries the materials do not get
destroyed during use, unlike fossil fuels. In the case of Li-ion batteries, all the
mined and processed materials can be almost 100% recycled if not then 90%
recycled and reused within battery manufacturing as well as many other
applications such as medical-grade pharmaceuticals or lubricants. Around the
world, billions of dollars are being invested in the recycling of advanced
chemistry cells and this problem will be solved. So, for the next 5-6 years we
will be counting on freshly mined material but later the share of recycled
material as a part of the new battery manufacturing supply chain will start
going up.
IESA has launched IRRI (IESA Re-use and Recycling Initiative) program,
and we are working with key stakeholders and government agencies to
enable this.
Q: What are some of the learnings India can take from other countries
that have set up giga factories already?
A: This is an area where technological changes happen very rapidly so
companies entering this area have to invest heavily into R&D and be on top of
technological changes. We are of the view that there is not one single silver
bullet, there are multiple technologies used in various applications. We think
there is a great opportunity for multiple technologies to coexist but the
foundation of this is R&D. Apart from R&D we need to invest heavily in skill
development.

10. This being a new field, India does not have skilled manpower to address
this, IESA under IESA Academy had already started conducting hands-on
training for cell manufacturing and has partnered with SECRI, CMET, and
other National Labs for training people and we will be scaling it. Apart from
this, we need to have a program where we can tap into the number of Indian
students or researchers currently working in this area. We need a government
or private program that is focused on bringing back all these scientists and
researchers working with international companies that are open to returning to
India and contributing to the development of this sector in the country.
Also, there could be many foreigners interested in coming and tapping into
this opportunity.
So, we first need to focus on manpower and skilled resources, and then we
need to make start utilizing industry-academic collaboration to stay on top
of R&D requirements.
Q: Talking about the other side of the equation in battery manufacturing,
how do you think the demand is shaping up in India for battery storage?
A: We are very confident that the demand in India is huge. Although right
now, the demand for Li-ion batteries is perhaps a little under 5GWh so
50GWh seems like overkill in terms of manufacturing. But, as we are seeing
different price points being matched for applications, the market is expected to
grow very fast. We anticipate that by the time this 50 comes online buy 2027
the market demand at the minimum will be 80GWh or it could be possible
even more than 100GWh.
We expect this manufacturing will serve only around 50 percent of the
domestic demand the key part that is required right now is:
confidence-building measures. Business leaders are currently a little
skeptical about this proposition as they have seen in areas like coal or others
where they made big plans, and investments, but the actual demand did not
follow so they are wondering: will that happen again?

11. This is where people need to realize that previously they invested in
technologies towards the end-of-its-life internationally, whereas this is the
sunrise sector, and these technologies which will dominate the world at least
for the next 20-30 years if not more.
In terms of demand-generation activities, there is already a FAME-II policy
by DHI wherein many State Transportation Enterprises are buying electric
buses. EESL is looking at investing in setting up EV charging infrastructure.
IESA is working with EESL to find the right charging location. Another
important aspect is we need to educate the end-users so they do not keep
waiting for cheaper batteries and cheaper EVs and impress on them that there
are several applications where they can switch to electricity today and start
saving money. We need to work on consumer education in helping them
make the right decision, with these factors demand should pick up.
IESA is working on the stationary side of agencies like Solar Energy
Corporation of India (SECI). SECI had a huge role to play in the success
story of the solar sector so they are also going to play a key role in identifying
hybrid projects with solar, wind, and storage, and those will drive
applications on the stationary storage side.
India is already a vibrant market for UPS, inverter backup power applications,
here I don't think any government intervention is required, the only thing
necessary is enabling financing as the advanced technologies are far more
energy-dense so they offer five to six times longer life, but they also have a
higher capital cost for at least the next 3-4 years. If the financing is available,
then they can hit the ground running.
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