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India set to Introduce PLI Scheme; Crucial for Carbon Neutrality Ambitions

India aims to introduce a production-linked incentive (PLI) scheme for so-called ‘niche’ batteries in order to encourage research and development of such high-tech items, which are critical for the country's ambitious energy transformation and carbon neutrality ambitions.

Due to the impact of local weather conditions on battery chemistry, as witnessed in recent incidents of electric vehicles catching fire during a hot summer, the new PLI system may prioritize battery research and development as a key component. Compared to the current PLI plan for advanced chemistry cell (ACC) battery storage, the scheme is projected to provide larger incentives to producers.

The financial subsidy for ACC battery storage has been capped at 20 percent of the effective ACC price, net of goods and services tax or effective sales turnover, under the PLI system. The heavy industries ministry announced last month that Reliance New Energy Solar Ltd, Ola Electric Mobility Pvt. Ltd, Hyundai Global Motors Co. Ltd, and Rajesh Exports Ltd had been chosen for the 18,100 crore PLI program for ACC battery storage.

With Prime Minister Narendra Modi's commitment to India achieving net zero carbon emissions by 2070 at the COP-26 meeting in Glasgow last November, energy transformation and carbon neutrality have risen to the forefront of policy making.

Lithium iron phosphate, nickel manganese cobalt, and lithium titanium oxide batteries, all of which are classified as lithium-ion batteries, are currently among the most commercially feasible options. The government intends to foster the development of other chemistries for battery manufacture in the country, thus researchers and corporations would go beyond lithium-ion batteries under the proposed system.

The search for new technologies and battery chemistry comes at a time when there is a severe lithium shortage, with India at conflict with China, which is a big lithium importer. In addition, the mineral's price has risen, affecting downstream industries. India is also attempting to obtain lithium from other big producers, like Australia and Argentina.

The efforts have gained traction as a result of the government's ambitious climate change targets, as well as a significant focus on increasing domestic manufacture of electric vehicles.

In June of last year, the government announced the PLI plan ‘National Program on Advanced Chemistry Cell Battery Storage’ with the goal of producing 50 gigawatt hours of ACC.

“The government seems determined to make India a manufacturing and export hub of batteries. Efforts are on globally for newer chemistry for battery manufacturing as the demand for batteries rise. If the initiative becomes successful, it would provide an Indian company the patent to the chemistry that bodes very well for India’s aim to be cater to the global supply chain,” says Amit Kumar, partner and leader power and utilities mining, PwC India.

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