PLI Scheme for ACC Battery Storage – Challenges and Opportunities￼
Production Linked Incentive (PLI) Scheme for Advanced Chemistry Cell (ACC) Battery Storage was the highly anticipated policy that the industry The post PLI Scheme for ACC Battery Storage – Challenges and Opportunities￼ appeared first on EVreporter.
Production Linked Incentive (PLI) Scheme for Advanced Chemistry Cell (ACC) Battery Storage was the highly anticipated policy that the industry was looking forward to setting up manufacturing of Lithium-ion cells and other advanced technologies in India. PLI for ACC is one of the 13 schemes approved by the Indian Government. The Department of Heavy Industries (DHI) had notified about this scheme in June 2021. It encourages companies (domestic and foreign) to set up Giga-scale (minimum 5GWh) battery storage manufacturing in India over a period of 5 years.
The PLI for the ACC scheme has been allotted ₹18,100 Crores to support 50GWh annual capacity of manufacturing setup in India. ₹362 Crores has been capped for each GWh. The incentives will be disbursed over 5 years, starting from 2024. The winners of the PLI for ACC scheme are Rajesh Exports (5GWh), Hyundai Global Motors (20GWh), Ola Electric (20GWh) and Reliance New Energy Solar (5GWh). The program agreement with the winners will be signed in June 2022, and the winners will be given two years to set up an initial manufacturing facility and gradually ramp up production as per the plan they bid. Although it is called a production linked incentive, the incentives are actually dependent on the sales volume. The PLI for ACC scheme is eligible for all types of battery storage technologies that meet the minimum technological requirement as mentioned in the below image.
Any company bidding in the PLI for ACC scheme must have a battery technology that has a cycle life to gravimetric energy density ratio at least in the ‘A’ cell. Any company able to achieve A*(1.2) would achieve 1.2x of the incentive they asked for in their bid. Similarly, A*(1.2^2) would mean 1.44x the incentive, A*(1.2^3) would mean 1.728x the incentive, and A*(1.2^4) would mean 2.0736x the incentive. In my opinion, there is no technology today that can be manufactured on the GWh scale and can fit in the A*(1.2^2) and higher category.
Since the prices of battery technologies are expected to fall in the coming years, the scheme has a reduction factor applicable to the subsidy amount, as shown below:
The first two years are for the initial manufacturing setup, so not much production is expected. The subsidy in 2024-25 and 2025-26 is 100%, and it is reduced by 10% in 2026-27. The subsidy is further reduced by 20% in 2027-28, making it effectively 72% of the original subsidy. The subsidy is again reduced by 40% in 2028-29, making it effectively 43% of the original subsidy.
From my analysis of the import data from 2021, India imported less than 3GWh of Lithium-ion cells and battery packs in 2021. This data excludes Lithium-ion cells that go for cell phone manufacturing since no player in the PLI for ACC scheme bid for manufacturing cell phone batteries. Battery packs made with LFP prismatic cells accounted for close to 1GWh. NMC 18650 cylindrical cells accounted for close to 1GWh. The rest 1GWh imports were a mix of NMC 21700 cylindrical, NMC 26650 cylindrical, NMC pouch, NMC prismatic, LFP 26650 cylindrical, LFP 32650, LFP 32700, LFP pouch, LFP prismatic, LTO cylindrical and NMC battery packs.
The 3GWh Indian market in 2021 should reach a minimum of 50GWh by 2029 for the scheme to work efficiently since incentives are related to the sales volume. The winners will have to strictly adhere to their production plans as described in their bidding document. Any deviation can lead to penalties.
Moreover, other companies will be manufacturing and selling their batteries in India by 2029, which will further expect the market demand to be higher than 50GWh by 2029. The author is aware of at least three other companies planning to set up Lithium-ion cell manufacturing in India by 2029.
The scheme did not encourage technology start-ups with the potential to raise funds in future to directly participate since there was an eligibility criterion of net worth. However, consortiums of multiple companies were encouraged. A company bidding must have a net worth of ₹225 Crores for every GWh they bid for. Since the minimum capacity was 5GWh, a company must have a minimum net worth of ₹1,125 Crores. A company having a net worth of more than ₹1,500 Crores could bid for any amount of GWh.
It was also difficult for companies working with start-ups with innovative technologies to participate in this scheme since there are various compliance certificates required from the technology companies. New start-ups do not always have such compliance certificates, and a lack of such certifications can lead to disqualification under this scheme.
If PLI for ACC scheme is implemented well, it would mean one of the fastest industrial growths in the history of the battery industry, since presently, there is no mass manufacturing of advanced chemistry cells such as Lithium-ion batteries in India.
All the four winning companies are already active in the Indian market. They are focusing on manufacturing for captive consumption, and their products are well placed with a potential to grow multi-fold by 2029. PLI scheme also allows incentives on export sales.
Rajesh Exports is expected to manufacture batteries for heavy-duty EVs. They are likely to produce LTO cells.
Hyundai is expected to launch multiple models of electric cars in India in the coming years, including various budget-friendly EVs. They are expected to bring LG Chem’s NMC pouch cell technology to India.
Ola Electric’s 500-acre Futurefactory is expected to be one of the world’s largest electric two-wheeler factories, with a capacity to manufacture 10 million EVs annually.
Reliance New Energy Solar needs no introduction. It is one of the fastest-growing companies in the solar space and is expected to add battery storage to its solar operations since solar with BESS is seeing an increasing trend across the globe. The company has acquired LFP battery technology company Lithium Werks and Sodium-ion battery company Faradion. The LFP technology by Lithium Werks is market-ready.
About the author
Rahul Bollini is an independent R&D consultant in the field of Lithium-ion cells and batteries with 7 years of industry experience. The author can be reached at email@example.com or +91 72049 57389 .
This article was originally published in EVReporter April 2022 Magazine that can be accessed here.
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The post PLI Scheme for ACC Battery Storage – Challenges and Opportunities￼ appeared first on EVreporter.