RIL — Gigafactories

RIL — Gigafactories

  • Reliance Industries, the country’s largest company by revenues, seems to be most ambitious of the lot. It has aggressive plans and is looking at a factory that would produce Lithium-Ion (Li-Ion) batteries of 25 gigawatt-hours (GWh) capacity. Reliance factory would be in either Gujarat or Maharashtra.
  • There is a lot happening in the EV space, and Reliance has long been in the energy business. Add to that, it now is a maker of phone and has telecom towers — all of them powered by Li-Ion battery. A factory even at half the 25 GWh capacity “will be huge for India.
  • A 25 GWh factory will cost at least $3.5 billion, benchmarked against spending on global projects of similar scale.
  • Reliance already has a partnership with British oil and gas company BP for energy storage projects near solar and wind energy installations in India.

India readies plan for $4 billion Tesla-scale battery storage plants

  • Over the last few months, there is a renewed buzz around electric vehicles. The positive environmental impact coupled with an outcry for ‘Atmanirbhar India’ has given this industry a new lease of life post Covid. Amid calls for ‘boycott China’, India is trying to step up its game on battery manufacturing which is required to propel the country’s dream to steer clean mobility.
  • Batteries make up for 50 percent of the cost of an electric vehicle, India imports this crucial component from China
  • India imported USD 1.23 billion worth of lithium-ion batteries in 2018–19, six times higher than in 2014–15.
  • The global electric car fleet exceeded 5.1 million in 2018, with a whopping 45% of these in China, up from just 8% in 2013, attesting to China’s dominance as the world’s largest electric car market.
  • Localisation of EV batteries is in the fray, but it can’t happen overnight, suggest experts.
  • Several foreign players have shown an interest in the Indian government’s plan to create large factories to make lithium-ion batteries
  • Last year, NITI Aayog sought the Cabinet approval for a proposal to build up to 10 large factories that would get subsidies to produce lithium-ion batteries used in electric vehicles.
  • Further, bids will be invited to set up gigafactories ( a term coined by Tesla that translates into a large manufacturing facility) with a total capacity of 50 Gigawatt hours (GWh) over a span of 10 years.
  • When you talk of assembling in India, initially you can do modules, and from modules, you can go to cells, because everybody imports cells right now. So when you do the assembly, you still have a lot of value addition there in terms of battery management system, thermal management system. Cell manufacturing is the last thing in the value chain, as far as car batteries are concerned.
  • Sooner or later India must reduce its dependence on China, but it must be done in a phased manner.
  • At some point, we will have to do it because we are looking at large-scale transformation to electric mobility.
  • From a practical point of view, we will have to do it in steps.
  • Currently, the trend in India is to source cells, build battery packs here in India, integrate it with battery management systems and chargers.
  • This is one level of technical know-how that we have in India right now.
  • A lot of companies are involved in this and many more are getting into this.

Government Support

In 2013, the government launched the National Electric Mobility Mission (NEMMP) to turn the electric vehicle dream into reality and over the next years introduced FAME I and II schemes to generate interest amongst the price-sensitive Indian consumer. It also made policy interventions with regard to batteries. In 2019, the National Mission on Transformative Mobility and Battery Storage was established with the following objectives

  • To drive clean, connected, shared and sustainable mobility initiatives
  • To launch a Phased Manufacturing Programme (PMP) to support setting up of a few large-scale, export-competitive integrated batteries and cell-manufacturing giga plants in India.
  • To create a PMP for localizing production across the entire Electric Vehicles (EV) value chain.

This plan is likely to help the government incentivize battery production in India. That’s not all — according to NITI Aayog’s Advanced Chemistry Cell and Battery Gigafactory plan, manufacturers can expect to get incentives close to USD 25/kWh.

  • This proposed battery policy can be termed output-based rather than based on inputs, with subsidy being linked to capacity creation committed.
  • The plan also suggests that those companies that can achieve 60% indigenisation by 2025 can apply for subsidy as well as avail the entire depreciation in one go.
  • State governments are also stepping up their game to offer capital subsidies in line with the central government.
  • Gujarat has been at the forefront and has already witnessed investments for Li-on battery manufacturing; the state is also offering subsidised utilities, under the ambit of the state’s electronic policies.
  • Suzuki Motor Corporation, Toshiba Corporation and Denso Corporation (JV) has invested Rs 37.15 billion and INR 12.14 billion, which will be distributed across two phases to build Li-ion battery assembly lines in Gujarat.
  • Telangana has announced incentives of 200 acres of land plus power and water facilities for manufacturing units, at a concessional rate. Andhra Pradesh took steps, way back in 2017, and announced allocation of 200–400 acres for development of the electric mobility-focused industrial park.
  • Maharashtra is not far behind, says a report by Invest India. Besides capital subsidies on fixed capital investments, the state will be an equity partner up to 9% in large, mega, and ultra-mega projects, with FCI over Rs 500 crores.

Growing Interest from Foreign Manufacturers

  • America’s Tesla and China’s Contemporary Amperex Technology have shown interest on the back of a strong government push to make India a global manufacturing hub for electric vehicles and its components.
  • The government, looking to encourage more private investment in the sector, has initiated tax incentives for manufacturers and a basic customs duty safeguard from 2021–2030 for those making advanced chemistry cells and batteries in India.
  • Battery storages will power clean electricity grids. India today stands tall amongst the top renewable energy producers of the world, with an installed renewable energy capacity of about 80 gigawatts (GW). The government’s mission is to achieve 175GW by 2022 and 500GW by 2030, as part of its commitment to climate change.
  • As startling as it may sound, each GWh (1,000 megawatt hour) of battery capacity can power 1 million homes for an hour, and around 30,000 cars.
  • Another US company XNRG has established a high temperature lithium-ion factory in Gurugram in India that can produce 240 MWh of battery production capacity. The factory has begun production of its HT Mobility Smart Telemetry Battery XM 5kWh for rickshaws, e-bikes, e-motorcycles, golf carts, solar and wind farms, and telecom tower UPS.

Scaling up on the Home Front

  • India has a slew of players that are scaling up efforts to set up battery manufacturing plants in the country. Exide, a leader in battery production for ICE automobiles, has announced a joint venture with France-based Leclanché to build lithium-ion batteries.
  • As part of this collaboration, Leclanché is likely to provide access to its technical knowhow and intellectual property for Li-ion cells, modules and battery management systems, while Exide will tap into its vast sales network and brand legacy.
  • Another level is the assembly and engineering of the cell itself. So, you have the chemistry of the cell and then you have to put it in a cylindrical can. In this, you can bypass the well-known and established cell companies but you will have to go to their Tier 1 suppliers to source those chemicals. If you look at CATL, LG or any of those cell companies, they also have their own supply chains.
  • One of the electrodes used in cells is graphite, and India is its largest producer. There is a process that makes it EV-grade and that industry is not there in India, but in China.
  • By assembling cells, you get rid of your dependency on cell suppliers, but Tier 1 suppliers are also in China, who are into processing of these chemicals that go into making each cell. As the market matures and grows, you can also look at Tier 2 suppliers.
  • A joint venture called Khanij Bidesh India has been formed between three state-run companies — National Aluminium, Hindustan Copper and Mineral Exploration Corp. — to acquire lithium and cobalt mines overseas, vital to manufacturing of lithium batteries.
  • Additionally, Amara Raja Batteries, the country’s second-biggest traditional battery maker by value, will build a lithium-ion assembly plant.

What Lies Ahead?

  • As per the India Energy Storage Alliance, the market for energy storage will rise to more than 300 GWh by 2025. However there are certain caveats.
  • The mines where you find raw materials for lithium batteries are mostly found in China. The Chinese have presence at multiple levels of the cell supply chain. Indian companies can build their own cells, chemical companies can get into processing of those metals, but the mining companies would be Chinese. To some level, there will be dependency on China.
  • India plans to set up its own battery storage manufacturing plants styled after Tesla’s ‘Gigafactory’ in Nevada, United States.
  • The Tesla-Panasonic venture called for an investment of $5 billion but India’s only planning to spend $4 billion to set up four different factories.
  • Each factory will have the capacity to manufacture 10 gigawatts hours of power per year.
  • India plans to set up at least four Tesla-type ‘ Gigafactories’ in the country but for $1 billion less than it took Elon Musk, the billionaire CEO of Tesla.
  • Musk’s Gigafactory in Nevada, has a theoretical capacity of producing 35 gigawatt hours (GWh) of batteries per year and took an investment of $5 billion to setup.
  • Panasonic, who’s partnered with Tesla to build the Nevada facility, has stated actual output is actually at around 24 GWh.
  • India’s battery manufacturing plants, on the other hand, plan on producing 10 GWh per factory every year — that’s a total of 40Gwh — with an investment of $4 billion.

Plans to go big

  • Producing batteries goes hand-in-hand with India’s plans to push for electric vehicles in order to reduce pollution and cut down its dependence on oil imports — which currently sits at over 80%, making India the world’s third-largest oil consumer.
  • NITI Aayog estimates that India is going to need at least six such battery storage manufacturing plans by 2025 and six more by 2030.
  • So, accounting of an ever increasing demand for energy, it has recommended setting up 11 factories by 2025 and another 13 by 2023 — bringing the grand total to 24 factories producing 240 GWh every year.
  • In order to get manufacturers on board, India may offer incentives like concessional financing options or a minimum alternative tax (MAT), the report said.
  • While the government will be setting up these factories, it has no plans to interfere with the technology. Which technology should be manufactured will determined depending on demand and prices in the market.
  • India is now a world leader in renewable energy with its ambitious plans to set up clean energy installments and pump up investment. As of now, the country has around 80 gigawatts (GW) of renewable energy capacity with plans to reach 175 GW by 2022 and 500 GW by 2030 as part of its climate change commitments.
  • The global production of Li-Ion batteries stands at over 100 GWh today and is expected to climb to 273 GWh by 2021. Electric vehicle (EV) maker Tesla has the biggest factory that will produce 35 GWh annually when its so-called Gigafactory is fully built out in 2018 in Nevada, US. Most of the remaining capacity is coming up in China, with India not even a blip on the global batteries production map in most projections.

The Li-Ion bandwagon

  • Reliance and Adani mulling Lithium-ion Battery manufacturing in India. In what will be the biggest private investment in a new industry in recent years, India’s leading business groups are readying plans to enter battery manufacturing and battery pack assembly with investments running into several billion dollars over the next decade or so.
  • The Adani, the JSW, the Mahindra and the Hero groups of companies are in the race to set up Li-ion battery production in India.
  • Not only Reliance, others like JSW, Adani, and Mahindra are also looking at the battery pack business.
  • With the EV race in India starting — India has ambitions of being an all electric car nation by 2030 — international players such as Suzuki Motor Corp. and Toshiba Corp. have already unveiled their Li-Ion battery plans for India. Last week, Suzuki announced that it will invest Rs 1,150 crore together with Japanese partners Toshiba and Denso Corp. to set up a Li-Ion battery facility in Gujarat. Suzuki will own 50%, Toshiba 40%, and Denso 10% of the joint venture that will make batteries and battery packs for Indian car maker Maruti Suzuki and export to Suzuki.
  • Mumbai-based JSW Energy, part of Sajjan Jindal-led JSW Group, which wants to launch EVs by 2020, is also planning to set up a battery factory. The energy storage opportunity for India extends beyond electric vehicles into telecom, micro grids, and solar storage for household and power banks. JSW Energy plans to enter into energy storage systems business for both in static and mobility applications as it will be forward integration of its existing business of power generation to distribution.
  • Hero Future Energies is awaiting a government policy before taking the plunge. They are looking at energy storage and lithium ion battery packs manufacturing. That’s is a big opportunity, both in vehicles and utility, but they haven’t taken up a firm decision yet, on which direction we should take as there is no policy around it. It’s an expensive business to be in and we are waiting for the government to bring out some policy and some incentives.
  • Exicom, a telecom infrastructure provider that is part of the HFCL group, which has been in the Li-Ion battery business since 2013, is increasing its manufacturing capacity to 1 GWh. They have more than 500 megawatt of deployment, mostly in telecom towers for backup application. They have been importing the cells and making battery packs in their factory in Gurugram. The demand is slowly opening up — in the EV sector, for home use, for grid scale ESS, among others — especially after the price has come down in the past 24 months. They are expanding their capacity to 1 gigawatt now.

Mobile towers, ATMs

  • The rush into Li-Ion battery production is part of a reset that India is attempting in its energy industry. India wants to reduce its oil dependency (it imports more than 80% of its crude currently) and move to a future that uses solar energy to power itself. It has an ambition to increase solar generated power to 100 gigawatt (GW) by 2022 from the current 13.65 GW.
  • But, this is only one part of the push. By 2030, the central government wants only electric cars to be sold in India. India will overtake Germany to become the world’s fourth-largest car market by volumes; and the third-largest by 2020.
  • In its National Electric Mobility Mission Plan, the government targets six to seven million EVs on Indian roads by 2020. That target is likely to be missed but to power EVs, the country will need Li-Ion batteries and battery packs. Currently, the battery pack costs nearly half an EV’s cost in India. Any effort to reduce that cost — via local production, for instance — will add to the shift towards a lower petroleum footprint in the economy.
  • The impact of this push is not just on EVs. With power outages common in India, mobile towers operated by telecom service providers and ATM networks are already among the largest users of Li-ion batteries.
  • The largest consumer for Li-Ion batteries is telecom towers. Reliance Jio is already importing batteries for its telecom towers. The diesel gensets used in the rural telecom towers are now being replaced with Li-Ion batteries. Similarly the Lead-acid batteries used for telecom towers in tier-1 and tier-2 cities are also being replaced with Li-Ion batteries.
  • Mobile towers, the second largest consumer of diesel (used to power generators) after the Indian Railways, are under pressure to move to less environmentally-harsh sources of energy. The Indian telecom regulator has recommended mobile operators to convert all rural mobile towers and 50% of urban mobile towers to be hybrid powered by 2020.
  • Reliance Jio, the mobile phone service owned by Reliance Industries, has been procuring Li-ion batteries produced by Paris-based company SAFT for powering its mobile towers. In 2015, Reliance Jio had placed an additional order for Li-Ion batteries, from the Evolion series manufactured by SAFT, worth over €20 million.

Virtuous Li-Ion prices

  • The prices of Li-Ion cells are also falling, increasingly making the solar energy-battery storage combination to power energy needs a reality.
  • Back in 2011, Li-ion batteries cost around $600 per KWh to produce but with improvements in battery technology, this cost has substantially come down. Today, batteries around $200 per KWh. Tesla claims that the Tesla Model 3 battery comes at a cost below the $190 per KWh mark.
  • While the Model 3 is yet to hit Indian shores, Tesla founder Elon Musk was said to being wooed by the government to set up a manufacturing unit for its EVs in India. Musk had even tweeted that a Gigafactory in India would make sense in the long run.
@GangsOfGtown Given high local demand, a Gigafactory in India would probably make sense in the long term.
- Elon Musk (@elonmusk) October 25, 2015
  • Currently, Indian companies are importing Li-Ion cells from China and making battery packs in India. Setting up a cell manufacturing unit is an expensive proposition as compared to importing cells and manufacturing packs.
  • Public sector units are eyeing energy storage and Li-Ion cell manufacturing in India.
  • The Indian Space Research Organisation (ISRO) had developed a Li-Ion battery technology for use in its satellites and launch vehicles such as GSLV and PSLV.
  • ISRO is teaming up with heavy electric equipment maker BHEL to help develop low-cost Li-Ion batteries.
  • We are moving ahead with the plan and a cabinet note for the same has been floated. Why should India import battery storage units when we have the largest market here?.
  • Aimed at securing India’s energy needs, the plan to set up these factories of 10 gigawatt hours (GWh) each is being helmed by federal policy think tank NITI Aayog and looks to accomplish what Tesla has done at its Gigafactory in Nevada, US.
  • The focus on battery storage manufacturing will enable India to develop an electric vehicle ecosystem including manufacturing and R&D, an opportunity the country missed while developing the solar industry.
  • As part of the plan, the government may offer a raft of incentives to manufacturers such as concessional financing options with around 3% foreign exchange hedge on overseas loans and a fixed 3% interest subvention on loans availed in Indian rupees. In addition, a reduction in minimum alternative tax (MAT) may be offered.
  • The support extended by the government for advanced chemistry cells and battery manufacturing may also include an investment-linked tax incentive under Section 35 AD, a deemed infrastructure status and a suitable basic customs duty safeguard. It may also offer an output-linked subsidy on kilowatt hour (KWh) of cells sold.
  • Apart from electric vehicles, such battery storages will cater to the consumer electronics industry and electricity grids, given the intermittent nature of electricity from clean energy sources such as solar and wind.
  • According to a conservative scenario envisaged by NITI Aayog, India will need six such gigawatt-scale facilities (of 10 GWh each) by 2025 and 12 by 2030. While this doesn’t include the export market potential, the base scenario envisions 11 such giga factories by 2025 and 24 by 2030.
  • To put this into perspective, each GWh (1,000 megawatt hour) of battery capacity is sufficient to power 1 million homes for an hour and around 30,000 electric cars.
  • The programme aims to be technology-agnostic, meaning it will be left to the market to determine which technology is best suited for the country, depending on demand and price.
  • India has become one of the top renewable energy producers globally with ambitious capacity expansion plans. The country has an installed renewable energy capacity of about 80 gigawatts (GW) and is running the world’s largest renewable energy programme, with plans to achieve 175GW by 2022 and 500GW by 2030, as part of its climate commitments.
  • The government has studied what other developed economies have done to secure their energy needs amid an escalation of tensions in the Persian Gulf region and the Organization of the Petroleum Exporting Countries-plus arrangement agreeing to extend production cuts for crude oil.
  • As the world’s third-largest oil consumer, India is particularly vulnerable as it imports more than 80% of its oil requirements and around 18% of its natural gas.
  • On the demand creation side, the plan involves providing tax credits at the retail level and state-level grants to promote usage of electric vehicles. The GST Council, chaired by finance minister Nirmala Sitharaman, is expected to meet shortly to decide on lowering tax rates for electric vehicles to 5% from 12%.
  • The Union budget earlier in July also announced tax breaks for setting up mega-manufacturing plants for solar photovoltaic cells, lithium storage batteries and solar electric charging infrastructure.

What are Giga Factories

  • In simple terms- these are the huge factories
  • Elon Musk is believed to have first coined the term ‘Gigafactory’.
  • He once said production of Tesla model-3 cars from one of his factories would need to be ‘something that’s comparable to all lithium-ion production in the world in one factory.’
  • The word comes from the prefix ‘giga-,’ which is used to denote a measurement that’s been multiplied by one billion (109). A common example of this is with the kilogram, which adds the prefix ‘kilo-’ onto ‘gram’ to denote one thousand grams. ‘Giga’ is believed to come from the Greek word ‘gigas,’ meaning ‘giant.’ In short, Musk is saying he wants a really huge factory.”

How many such factories are there in the world?

  • There are at present three Gigafactories in the world
  • Gigafactory 1: This has been operational since 2013 and is located in Nevada, USA. It primarily develops lithium-ion batteries from start to finish. Alongside the batteries, the factory produces electric motors for the Tesla Model 3, the company’s cheapest-ever car, plus the Powerwall and Powerpack energy storage systems designed to work with renewable sources.
  • Gigafactory 2: It’s located in Buffalo, New York. It produces photovoltaic solar panels, like the ones used in the Tesla Solar Roof.
  • Gigafactory 3: This is Tesla’s latest factory where construction started in January 2019. It’s located in the Lingang industrial zone of Shanghai, the first Gigafactory located outside of the United States. Giga factory 3 is planned to produce affordable versions of the Tesla Model 3 and Tesla Model Y for the Greater China market
  • More Gigafactories are yet to come up including one in Europe, possibly Germany.

Indian context

  • Recently, the LIBCOIN consortium with Magnis Energy Technologies Limited holding 20 percent of non-dilutive ownership along with state-owned BHEL finalised a deal with the Government of India, Ministry of Heavy Industries and Public Enterprises, to build ‘India’s first Lithium-ion Battery Gigafactory’.
  • Country’s maiden gigafactory will start at 1GWh and will eventually increase to 30GWh. The project will be a part of the ‘Made By India, For India’ initiative, which will accelerate domestic manufacturing of the important components for electric vehicles.

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