India’s PLI Scheme for ACC Battery Storage Manufacturing

Posted by Written by Naina Bhardwaj Reading Time: 3 minutes

Under the PLI scheme, ACC battery storage manufacturers that are selected as beneficiaries must set up a production facility within two years. The selection will be done via a competitive and transparent bidding process.

The article outlines the PLI scheme and eligibility criteria as well as how benefits will be rolled out.

On May 12, 2021, India’s central cabinet approved the proposal for the implementation of Production Linked Incentive (PLI) Scheme ‘National Programme on Advanced Chemistry Cell (ACC) Battery Storage’ (NPACC). An outlay of INR 18,100 crore (US$2.49 billion) has been earmarked by the government towards the scheme, which is intended to establish local manufacturing capacity of 50 Giga Watt Hour (GWh) of ACC and five GWh of Niche ACC capacity.

The main implementing agencies for the scheme are the Department of Heavy Industries and NITI Aayog.

What are ACCs?

ACCs are the new generation of advanced storage technologies that can store electric energy, either as electrochemical or as chemical energy, and convert it back to electric energy as and when required. They will cater not only to electric vehicles but also to the consumer electronics industry, solar rooftops, and electricity grids.

How the PLI scheme works to support manufacturing growth

The objective of the scheme is to align battery manufacturing in India with the “Make in India” and “Atmanirbhar Bharat” initiatives and reduce import dependence.

Under the PLI scheme, ACC battery manufacturers will be selected through a competitive and transparent bidding process, and selected beneficiaries will have to set up a manufacturing facility within two years.

The incentives under the PLI scheme will be disbursed over a fixed period of five years, from the time of commissioning of the manufacturing facility. This is expected to achieve economies of scale and boost exports, thereby helping large domestic and international manufacturers in setting up a globally competitive ACC battery set-up in India. This in turn is important for the growth of the homegrown electric vehicle (EV) industry.

Breakdown of the NPACC Scheme: Key points

  • Set up 50 GWh manufacturing capacity for ACC batteries by attracting investments totaling INR 45,000 crore (US$6.20 billion).
  • Each selected ACC battery Storage manufacturer to set-up an ACC manufacturing facility of minimum 5 GWh capacity, achieve a domestic value addition of at least 25 percent and incur the mandatory investment INR 225 crore (US$31.02 million) /GWh at ‘Mother Unit Level’ within two years.
  • The ACC battery manufacturer will need to ensure a minimum 60 percent domestic value addition at the Project level within five years.
  • The incentive will be disbursed over a period of five years. It will be paid out on the basis of energy efficiency, sales, battery life cycle, and localization levels.
  • The scheme proposes that the relevant state government, central government, and manufacturer enter into a tripartite agreement where the state government will support the private sector by providing land for setting up the facility, assisting in procuring permits and licenses, providing trunk infrastructure etc.
  • Under the scheme, a quality and cost-based selection (QCBS) method will be used to evaluate bids where both the subsidy quoted and the value addition offered by the bidder would be taken into account during the selection process. The selection process will be competitive and transparent.

Expected benefits from the scheme

  • Facilitate demand creation for battery storage in India.
  • Facilitate Make-in-India and Atmanirbhar Bharat, thereby emphasizing domestic value capture and reduction in import dependence.
  • Facilitate demand for EVs, which are proven to be significantly less polluting. One of the key agendas for ACC battery storage will be to reduce India’s Greenhouse Gas (GHG) emissions.
  • Import substitution of around INR 20,000 crore – INR 25,000 crore(US$2.76 – US$3.45 billion) every year, on account of oil imports as this scheme is expected to accelerate EV adoption in India.
  • Impetus to research and development to achieve higher specific energy density and cycles in ACC.
  • Promote newer and niche cell technologies.

Push to India’s robust growth sectors

ACC battery manufacturing represents one of the leading economic opportunities for several global growth sectors, such as consumer electronics, EVs, and renewable energy.

The EV industry, which is one of the most promising sectors in India to watch out for, stands to benefit from this scheme. One of the major factors contributing towards higher costs of EVs is the import of batteries. Another factor that restricts the industry growth is lack of supporting infrastructure like charging stations. This new scheme gives a push to local manufacturing facilities and can steer the industry growth to achieve the target of energy and transportation. ACC batteries, which display the capability of energy storage, can also be the key to achieving the goal of round-the-clock supply of power from renewable energy.

The NPACC PLI scheme is also a vital push towards local capacity building in core competent technologies that will make India a hub of clean energy. It will also reduce excessive dependence on imports, including from China. This is becoming increasingly important given recent geopolitical events, besides boosting local employment.

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