Written by / Zhang Ou
Edit/Windsor
Design / Shi Yuchao
Source/Oliver Wyman by Srinath Rengarajan
On October 22, 2021, India issued a tender for the Production-Related Incentive Scheme (PLI Scheme) for Advanced Chemical Battery (ACC) Battery Storage, which will accept applications by 11:00 a.m. Local Time on January 14, 2022 (1:30 p.m. Beijing time on January 14, 2022), and the technical tender will be opened on January 15, 2022.
India's Ministry of Heavy Industry recently announced that this initiative has received a positive response from domestic and international investors, receiving a total of 10 companies submitted bids, the total tender amount of about 130Gwh, which is 2.6 times the 50Gwh battery storage capacity that the country hopes to establish.
Here are the 10 companies that participated in the bidding:
Reliance Energy
Hyundai Motor
Aura Electric VehicleS Pte Ltd (Ora Electric)
Indian electromechanical supplier Lucas-TVS Limited
Car manufacturer Mahindra & Mahindra
Amara Raja Battery Co., Ltd., India
Exide
Rajesh Exports
Larsen & Toubro Ltd. (Larsen & Toubro)
India Power Corporation
Advanced Chemical Battery (ACC) storage program
The Advanced Chemical Battery (ACC) Storage Scheme is funded by the government at US$2.4 billion (RMB15.23 billion), with total direct investment expected to reach US$6 billion (RMB38.1 billion) and import substitution of approximately US$2.6 billion (RMB16.5 billion) per year.
The goal is to achieve 50GWh advanced chemical battery (ACC) manufacturing. Through the project, domestic added value is enhanced, local production is strengthened, and assistance is provided to establish battery storage demand for electric vehicles and fixed storage, ensuring that the levelized costs of battery manufacturing in India are globally competitive.
The Ministry of Heavy Industry said the ACC PLI program is expected to significantly reduce crude oil imports and increase the share of renewable energy at the national grid level, saving the country money.
The ACC plans to transition India from a traditional fossil fuel-based vehicle transportation system to an environmentally clean and sustainable electric vehicle system along with the previously announced "PLI Plan for the Automotive Industry" of US$3.5 billion (RMB22.2 billion) and the US$13.4 billion (RMB85.1 billion) Rapid Adaptation Program for Electric Vehicle Manufacturing.
At the pre-bidding meeting, about 20 potential bidders attended. Each selected ACC battery storage manufacturer is required to establish an ACC manufacturing plant with a capacity of at least 5GWh within 2 years, which will be rewarded according to the sales of the battery in the next 5 years; and to achieve at least 25% of the domestic added value within 2 years, to undertake the necessary investment of US$30.2 million (RMB 190 million) per Gwh, and to achieve at least 60% of the domestic added value within 5 years.
Beneficiary companies will have complete freedom to choose appropriate advanced technologies, equipment and machinery, raw materials and other intermediate projects to establish a battery production facility.
The plan also includes the development of a complete domestic supply chain and foreign direct investment in the country.
Sales of electric vehicles (including 2- and 3-wheelers) in India in the past two years▼
Although sales in 2021 have risen sharply compared with 2020, clean car technology has also become an important factor in reducing pollution in India's large cities and reducing dependence on oil, but due to the high cost of imported batteries, the vigorous development of electric vehicles is still in the early stages, in India's total sales of 30.82 million in fiscal year 2021, 329190 electric vehicle sales still account for only a very small part of the country's overall sales, and the electrification process has a long way to go.
The battery required for electric vehicles in India in the future is expected▼
* EV30@30 Campaign: Aims to achieve at least 30% of new EV sales targets by 2030. Participants included China, Canada, Finland, France, Germany, India, Japan, South Korea, Mexico, the Netherlands, Norway, South Africa, Sweden, the United Kingdom and the United States.
India's electrification grand plan
India is the world's fifth-largest automotive market and is expected to rise to Third place by 2030. In response to such a huge market development, the Indian government is already promoting "shared, connected and electric" modes of transportation that are more suitable for the current transition period, and expect to eventually achieve the ambitious goal of 100% electrification by 2030.
Back in 2013, India's Ministry of Heavy Industry launched the 2020 National E-Mobility Mission Plan as an indicator map for accelerating the manufacturing and adoption of electric vehicles in India. Later, in 2015, the Rapid Adoption and Manufacturing (FAME) plan for hybrid and electric vehicles in India was announced, focusing on four areas: demand creation, technology platform, pilot projects and charging infrastructure.
The program was launched in 2019 with spending US$1.36 billion (8.64 billion yuan) on upfront incentives for the purchase of electric vehicles, as well as supporting the development of charging infrastructure. The program will continue through 2025 while offering a variety of short-term incentives. In June 2021, further issued the second phase of the FAME program amendments, giving manufacturers incentives that significantly reduce the purchase price and stimulate market demand.
The ACC battery PLI described in this article is scheduled to be proposed in May 2021 and a tender will be launched in October.
Potential solutions
Building an Indian battery manufacturing ecosystem is undoubtedly the ideal solution. In this process, it is crucial to study the approaches taken by other countries and combine them with unique Indian factors. To achieve this, the efforts of policymakers, industry participants and a wider range of stakeholders in the ecosystem must be coordinated.
In battery manufacturing, the PLI program provides a springboard for Fast Follower companies and offsets the high capital expenditures required to build gigabit factories. This must be supported by the companies themselves and combined with incentives aimed at consumers and automakers to promote the penetration of electric vehicles.
The goal of the phased manufacturing strategy is to gradually increase vertical integration and localization. In the short term, Indian businesses must seek to partner with global companies across the value chain. Ensuring long-term supply of raw materials, especially key minerals such as lithium, nickel, cobalt and manganese, requires urgent efforts and upstream cooperation. At the same time, Indian OEMs must think deeply about which battery designs and chemical compositions are best suited for local environmental conditions, vehicle specifications, and price-sensitive customer base.
At the same time, it is crucial to fast-track battery research and development activities and promote deep cooperation between local universities and industrial companies. Battery design is critical to controlling technical specifications and performance parameters and ensuring quality and reliability.
In addition, India's advantages in information technology offer the potential to develop smart solutions and also help batteries to be better utilized in the first life application of electric vehicles and possibly second life energy storage solutions later. Finally, end-of-life waste management directives and expanded producer responsibility practices, coupled with recycling efficiency targets, can help battery manufacturers actively design and develop circular business models.