Price mismatch may hinder India’s battery storage projects: report

India’s clean energy transition is becoming increasingly dependent on energy storage systems as renewable energy generation expands. Image for illustration only. | Photo credit: Getty Images/iStockphoto

India’s rapid expansion of battery energy storage supply may be difficult to implement as tariffs revealed in auctions in 2025 increasingly do not appear economically viable, according to a report released by the Institute for Energy Economics and Financial Analysis (IEEFA) and JMK Research & Analytics.

India’s clean energy transition is becoming increasingly dependent on energy storage systems as renewable energy generation expands. Stand-alone energy storage tenders – where storage capacity is contracted independently of renewable energy generation assets – accounted for more than 71% of the country’s total energy storage capacity in 2025, with stand-alone battery energy storage system (BESS) projects accounting for around 60% of this share.

During 2025, approximately 10.4 gigawatts (GW) of stand-alone BESS capacity was allocated in 18 tenders. The bulk of the allocated capacity involved two-hour systems, particularly those designed to discharge twice a day to help cover the morning and evening peaks in electricity demand.

The report, Viability of Standalone Battery Energy Storage Tariffs Discovered in 2025, examines 18 auctions in which approximately 10.8 GW of standalone BESS capacity were bid and approximately 10.4 GW were allocated. It indicates a widening gap between tariffs and basic costs. “Between 2022 and 2025, tariff reductions far outstripped reductions in battery costs. Average stand-alone BESS tariffs fell by 79.6% over this period, while battery prices fell by 36.5%,” he notes. Prices of lithium carbonate in China — a key input for lithium phosphate cells — nearly doubled between mid-2025 and December 2025, and China’s gradual withdrawal of battery export rebates from April 2026 is expected to push up battery costs in India. Tariff cuts “accelerated sharply in the second half of 2025,” the report said, “suggesting speculative bidding behavior.”

Then there is also the question of the predecessors of the creators of the project. Only 46.3% of the allocated capacity went to firms the authors classify as having previous experience in the BESS sector. Of the top 15 honorees, 10 were new entrants, “including firms in primarily unrelated industries such as food processing, mining and packaging.”

“risk segment”

Based on benchmark estimates developed by JMK Research, a 2-hour, 2-cycle BESS system with a 12-year validity would require tariffs of around 2.3 lakh/MW/month to remain financially viable under prevailing assumptions related to capital expenditure, operational costs and financing. Compared to this benchmark, almost 75% of BESS’s allocated two-hour capacity in 2025 falls into the segment the report categorizes as “at risk”, where tariffs may be insufficient to support project implementation.

Installed BESS capacity in India was around 1.8 GWh as of March 2026 – compared to 50 GWh commissioned in the United States in 2025 and 65 GWh added by China in December 2025. The report warns that cumulative commissioning delays of nine to 18 months could limit renewable integration and India’s 500 GW renewable capacity target for the year 2030, and recommends cost-reflective tariffs, stricter eligibility standards, and a standardized payment security mechanism for storage.

Published – 19 May 2026 22:50 IST