Gujarat Urja Vikas Nigam Limited: Discovering Energy Storage Tariff

Name: Gujarat Urja Vikas Nigam Limited: Discovering Energy Storage Tariff (English version)
SKU: W38727

Swapnil Garg, Jaiprakash Shivahare

Product #:W38727

Supplier:Ivey

Discipline:Economics & Public Policy, General Management

Setting:India, 2024

Details:Case (PDF) • 16 pages • 2024-12-04

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In March 2024, the global energy storage market witnessed a landmark event. The Indian public utility Gujarat Urja Vikas Nigam Limited was able to lower its rates, or tariffs, for energy storage by 58 per cent, compared to bids submitted in a previously issued government tender. The low tariffs, which were the lowest rate ever reported, would open a floodgate of opportunities for the renewable energy industry. Commercially viable energy storage would encourage investments in inherently intermittent solar and wind generation. It would also offer a new alternative for improving grid availability and reliability. However, a sudden drop of over 50 per cent in tariffs also raised new questions. Was the submitted bid to the government tender feasible? Would these low rates be viable in the short and long term? Would low tariffs continue to attract investment in this sunrise sector, which was seeking significant private-sector investments? Amid these questions, the managing director of Gujarat Urja Vikas Nigam Limited had to determine how to proceed.

Learning Objectives

The case can be taught as part of senior postgraduate management courses on public policy, public-private partnerships, and even in technology management courses (e.g., technology forecasting and social change). The case is also suitable for coverage in executive education courses aimed at conceptualizing and designing public-private partnerships through appropriate risk allocations and devising mechanisms for managing uncertainty. The case can also benefit executive education programs for finance executives by nurturing a deeper understanding of the outcomes from unexpected results and the dilemma of the required decision-making process. This case informs students about managing technology uncertainty through public policy, which can be highly challenging. Students learn that the impact of technology disruptions on commercial aspects must be anticipated and addressed during policy formulation, and then managed during project implementation. The renewable energy sector has already witnessed these challenges in the past, when repeated technology disruptions led to commercial uncertainty and numerous failed projects. The case now provides a rich learning context for exploring whether the policy framework and the battery energy storage market are ready to face uncertainties and what the managers would have to do to ensure the smooth and rapid growth of the sector. The case offers students a deep understanding of how public-private partnerships aim to manage technological uncertainty. Specifically, after completion of this case, students will be able to

develop insights into the nuances of the battery energy storage technology and appreciate the inherent technology uncertainty in the energy storage market;
appreciate how reputation and appropriate risk allocation can lead to the efficient delivery of public service infrastructure through contracting; and
assess the short-term and long-term commercial viability of public-private partnership projects.

Gujarat Urja Vikas Nigam Limited: Discovering Energy Storage Tariff

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Learning Objectives