In simple words,Battery Energy Storage Systems (BESS) are like power banks on a large scale. They store electricity from sources like the grid or renewable sources like solar panels, and then release it as needed. This helps balance the grid, provides backup power, and improves overall stability.
Battery storage can be used in many ways that go beyond the simple emergency backup in the event of an energy shortage or blackout.
In the March 2024 Gujarat BESS tender, tariffs dropped to Rs 0.449 million per megawatt per month, down from Rs 1.084 million per megawatt per month in August 2022.
Currently, electricity costs have dropped from Rs 9 per unit in 2022 to around Rs 6-7 per unit, slightly surpassing pumped storage hydropower prices at Rs 5 per unit.
This reduction is mainly due to a 60% decrease in battery cell prices year-on-year, resulting from intensified competition and reduced costs of raw materials like lithium, cobalt, and nickel.
For example,Lithium Hydroxide a crucial component in the manufacturing of cathode materials for lithium-ion batteries, its prices have plunged by 66.02% between March 2023 and April 2024, while cobalt prices have fallen by 19.6% annually and battery-grade nickel prices have declined by 23% year-on-year.
The recent decline in BESS tariffs, with a notable 59% reduction observed in the March 2024 Gujarat BESS tender, is expected to drive greater adoption of BESS, enhancing round-the-clock power availability and making energy storage solutions more cost-effectively.
The decline in tariffs is linked to a 60% year-on-year drop in battery cell prices, driven by an increase in competition and declining raw material expenses, especially for lithium and other crucial battery materials. This cost decrease is expected to benefit firms involved in the manufacturing, installation, and upkeep of Battery Energy Storage Systems (BESS).
The decline in lithium prices has had a significant impact on the profit margins of battery manufacturers. With the decrease in the cost of lithium, a crucial component in battery production, manufacturers stand to benefit from lower production expenses, potentially boosting their profit margins.
According to reports, India’s renewable energy tenders reached 69 gigawatts (GW) in the fiscal year 2023-24, surpassing the central government’s annual target of 50 GW.
Here are the battery energy storage stocks that might stand to benefit from the tariff reduction.
Exide Industries Ltd
The stock closed at ₹473.3 per share on Thursday, marking a gain of over 74% in the past six months and a staggering 143% increase over the last year.
Amara Raja Energy & Mobility Ltd
The stock closed at ₹1,133 per share on Thursday, marking a gain of over 74% in the past six months and a staggering 143% increase over the last year.
HBL Power Systems Ltd
On Thursday, the stock closed at ₹521 per share, showcasing a remarkable surge of more than 75% within the last six months and an astonishing 80% rise over the course of the past year.
Siemens Ltd
The stock closed at ₹7,043 per share on Thursday, marking a gain of over 97% in the past six months and a staggering 81% increase over the last year.
ABB India Ltd
On Thursday, the stock closed at ₹8,283 per share, showcasing a remarkable surge of more than 94% within the last six months and an astonishing 112% rise over the course of the past year.
Written by Omkar Chitnis
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