India’s Energy Storage Ambition Faces A Reality Check

* Several solar and BESS developers in 2025 bagged several storage-related projects at record tariffs, most of them first-timers. 

* With more standalone BESS and solar+BESS tenders and avenues, India also witnessed a rise in BESS component manufacturers

* But how can the new rising industry, far more complex than solar, overcome the multiple challenges it faces?

The Indian renewable energy market is now undergoing a transition phase vis a vis energy storage. For long considered the vital bridge that will enable the market to move from a 20% wind + solar combination to over 40%, the sharp drop in storage prices over the past two years raised hopes that the best case scenario for storage additions would be achievable on time after all. Now, after the initial years of pilot projects and an exploratory phase, the battery energy storage system (BESS) market in India is finally taking its first steps towards scalability. 

Several tenders floated in 2025 attracted headline-grabbing low tariffs for storage projects. If 2025 was about tenders and the lowest-ever tariffs, 2026 is expected to be a testing ground for real on-ground execution and learnings.

Fate Of BESS Projects In 2025

In 2025, Madhya Pradesh grabbed national attention when the Morena solar-plus-storage project, with two hours of battery storage, discovered a tariff of ₹2.70/kWh, one of the lowest ever for such projects in the country.

In the same year, standalone tenders for two-hour battery energy storage systems (BESS) saw tariffs fall to a historic low of ₹1.48 lakh per MW per month. Meanwhile, firm and round-the-clock renewable energy (FDRE/RTC) projects were awarded at tariffs largely clustering in the ₹4.3–₹5.1/kWh range, depending on the tender structure and counterparty. A far cry from the Rs 8 plus prices discovered just 15-18 months earlier. 

The current surge in BESS projects closely mirrors India’s early solar journey, when key components were heavily dependent on offshore markets, the technology was still evolving, skilled manpower was limited, and China dominated large parts of the global supply chain.

A similar pattern is now evident in energy storage. Indian BESS manufacturers remain almost entirely dependent on China for lithium-ion cells and several critical components, echoing the vulnerabilities that once characterised the solar sector during its formative years.But BESS manufacturing and its project implementation is a completely different ballgame and far more complex than solar projects or solar module manufacturing. Thus, it will demand a lot more effort. 

Ratings and research firm ICRA said that a significant decline in battery costs over the past decade has helped reduce the cost of energy storage and adoption of BESS projects globally. Based on prevailing battery costs, ICRA estimates that the levelized cost of storage using BESS for 2-4 hours of storage is relatively high, in the range of Rs. 4.0-7.0 per unit, compared to Rs. 5.0 per unit for Pumped Storage Hydropower (PSP) projects. This has seen a significant improvement from the level of over Rs. 8.0-9.0 per unit seen in 2022. While BESS costs for 4-hour storage remain higher than that of PSP, the execution risks and gestation period for the BESS projects are much lower, by as much as 36 months.

Kishore Nair, CEO, Avaada Energy avers that “falling battery prices have certainly helped on bringing more interest in the storage-based project. However, some of the recent tariffs discovered in the bids are aggressive and are not aligned with the current prices of Class-1 Batteries. The falling trend of battery prices has stopped and prices are going up. China has recently changed some of its tax rules and export rebates, which has made prices fluctuate again”.

CRISIL research highlights that India’s installed capacity of storage-backed renewable energy (including battery and hybrid systems) could rise to approximately 25–30 GW by FY2028 from virtually nil in FY2025, signalling substantial market growth as storage becomes integral to renewables deployment.

How Solar & BESS Differs

BESS involves multiple technologies, hardware systems, chemical processes, and a wide range of commodities—many of which are exposed to global price volatility.

This complexity not only makes BESS projects more capital-intensive but also significantly increases the cost and technical difficulty of operations and maintenance over the mandatory O&M period stipulated in power purchase agreements, adding another layer of risk for developers and operators alike.

“First of all, BESS is prone to price escalation not only at the cell level but also across multiple fronts, including balance-of-system components such as copper and aluminium. BESS plants are far more complex than solar plants when it comes to O&M. Solar O&M is relatively straightforward, whereas BESS plants have numerous electronic subsystems—BMS, EMS, thermal management, and fire suppression—where failures tend to be more frequent. As a result, O&M is far more technical and critical to long-term performance,” said Ayush Misra, Co-Founder and CEO of AmpereHour Energy, speaking to Saur Energy. AmpereHour is primarily a BESS integrator, working with large developers to deploy battery energy storage projects at project sites.

“We are building national infrastructure assets that are expected to last 12 to 25 years. Batteries, if not engineered properly, can be extremely dangerous—we have all seen small battery systems catching fire. When you scale that up to megawatt-level systems, the risks multiply significantly. You cannot just assemble a few cells and expect it to work safely. That is why interdisciplinary engineering—mechanical, electrical, and thermal—is absolutely critical,”Akash Kaushik, Co-Founder of GoodEnough Energy, told Saur Energy. 

Lack of Domestic Cell Production

One of the key bottlenecks in the complete domestic production of BESS is the large-scale dependency on China for cells. As of now, besides Ola Electric, no Indian firm is producing battery cells in India, although Reliance is expected to produce domestic cells in the future. Battery cells account for around 55% cost of the BESS. 

Rajesh Kaushal, Energy Infrastructure & Industrial Solutions (EIS) Business Group Head, India & SAARC, Delta Electronics India says 

“At present, India is relatively strong in system-level capabilities—such as power conversion systems, energy management software, containerized solutions, and balance-of-plant integration. The gap remains at the cell manufacturing level, which is capital-intensive and technologically demanding.

In this context, achieving 50% domestic content at the project level becomes realistic around late 2026 to 2027, particularly for large utility-scale projects. This will depend on PLI-backed cell factories ramping up volumes, the emergence of standardized containerized BESS platforms, and early movers adopting vertically integrated manufacturing strategies. As these elements align, localisation will start to translate from policy intent into execution”.

A recent report from IEEFA states that despite strong industry interest, India’s Advanced Chemistry Cell Production Linked Incentive (ACC PLI) scheme, launched in October 2021, is yet to fully translate policy ambition into realised capacity. As of October 2025, only 2.8% (1.4GWh) of the targeted 50GWh capacity has been commissioned within the stipulated timeline, entirely by Ola Electric.

Of the 40GWh allocated so far under ACC PLI, Reliance New Energy is the only beneficiary that has indicated commissioning its second-round award capacity (10GWh) on time. Ola Electric plans to commission 5GWh of its 20GWh by March 2026. However, Ola’s decision to limit its capacity to 5GWh until FY2029 significantly dilutes the commitments that the ACC PLI scheme envisions, the report said. However, much like the PLI Scheme for Solar that has a massive cohort of manufacturers outside the scheme as well, BESS has also attracted players beyond PLI thankfully, considering how incompetent the whole process was.  

From BESS assemblers, container makers, balance of system manufacturers and service providers who can make EMS and other services, a new ecosystem is developing that will only grow stronger with the right incentives and demand. For example, Greater Noida-based GoodEnough Energy commissioned its 7 GW of BESS manufacturing unit recently with the kind of automation and high quality ambition that was barely expected just two years back in the sector. Companies like AmpereHour provide EMS services besides aiding developers as system integrators, even as Pace Digitek, another firm that was earlier in the telecom storage business, has moved swiftly to expand its BESS offerings.  

“In BESS manufacturing, several companies are entering battery pack assembly and container manufacturing, with some also moving into subsystems such as BMS, thermal management, and fire suppression. However, there is still no domestic production of battery cells specifically optimised for BESS. While a few pilot lithium-ion cell lines exist in India—such as Ola’s—these are not designed for grid-scale storage, leaving China as the only country producing BESS-optimised cells at scale. On localisation, most progress is being made in balance-of-system components, where India could already achieve around 30–40% localisation if mandated today,” Misra added. 

Are Aggressive BESS Tariffs Sustainable?

While the lower tariffs of BESS projects brought cheers for project developers, many experts are still skeptical of the viability of these projects on a long-term basis. This also hints at some of the infamous botched-up, lowest-ever solar projects in the past.

“About half of these tariffs are fundamentally unsustainable. Many bids were driven by the fear of missing out—either to establish execution credentials for future tenders or to support IPO narratives. I believe nearly 50% of bidders were prepared to forfeit their bank guarantees. This will become evident over time,” GoodEnough Energy’s Akash Kaushik told Saur Energy.

“Success in this high-stakes environment demands more than just a low cost of capital; it requires disciplined cost control, hyper-efficient project delivery, and, most importantly, conservative technical assumptions. The "winners" of the next decade won't be those who bid the lowest today, but those who build the most resilient assets. By prioritizing quality over aggressive positioning, we aren't just building projects - we are building a mature, bankable asset class that can withstand the test of time,” said Venugopal Rao Maddisetty, Chairman & Managing Director, Pace Digitek Ltd. 

Another fear some experts have is the lack of available data or experience of BESS projects in India. Some experts also told Saur Energy that in some projects, the bids were submitted keeping in mind zero error or understanding the risk associated with complicated BESS, which are maintenance-heavy. 

“One of the biggest uncertainties is the lack of long-term operational data. The industry does not yet have enough experience to fully understand what issues may arise in the five-to-ten-year window, and the most serious challenges are likely to emerge after ten years of operation. Performance outcomes will vary based on geography, climate conditions, system design, and usage patterns. In a 12-year or longer project, any major technical failure can be extremely damaging for developers,” an official from an EPC company said. 

2-hr, 4-Hr BESS Projects 

While the BESS market is moving towards more scalability, developers and EPC companies are now confronted with new challenges in BESS tenders on different formats ranging from 2-hour to 4-hour or even more to boost the reliance of variable renewable energy and make it firmer, akin to thermal-power. But how do these formats affect developers and EPC firms? 

“As storage project durations extend, developers are becoming more cautious and practical. While two-hour systems are well-understood and low risk, four-hour systems require closer scrutiny of degradation and warranties. For six to eight-hour storage, viewed as long-term infrastructure, developers prioritize proven track records, realistic performance assumptions, robust safety validations, and reliable long-term partners. The focus shifts from the lowest initial cost to long-term reliability and confidence,”Col Pravir Mishra, COO of Insolare Energy Limited, told Saur Energy. 

Avaada Energy’s Nair says “for 4+ hour durations, we are closely scrutinizing battery degradation profiles and increasingly looking at Pumped Hydro (PSP). We mitigate this risk by moving away from simple equipment warranties toward Energy Availability Guarantees from OEMs, ensuring the system can deliver its rated MWh throughout the 15–40-year PPA”

The market will also continue to be ruled by LFP batteries, at least till 2028, says Delta’s Kaushal. “LFP batteries are likely to remain the dominant chemistry for grid-scale and commercial storage applications in the near term, largely due to their bankability, higher energy density, and mature global supply chains. For most developers and financiers, LFP remains the lowest-risk option through at least 2028 and beyond.

That said, sodium-ion should be viewed as a complementary technology rather than a replacement. Its strengths—lower raw material risk, better high-temperature tolerance, strong safety characteristics, and potential cost advantages—make it well suited for stationary, low C-rate applications.

In the short term, LFP will continue to anchor grid and C&I deployments, while sodium-ion is likely to see pilot-scale adoption in grid balancing and renewable firming applications. Over the medium term, as manufacturing scales and costs stabilize, sodium-ion could play a meaningful role in diversifying India’s storage chemistry mix”, he predicts.

EPC Bottlenecks 

EPC companies involved in BESS deployment said that equipment availability is no longer a major constraint; instead, the primary challenges lie in land readiness and grid connectivity. These issues are further compounded by the inherent technical complexity of BESS projects, which adds to execution risk.

“Today, the biggest execution bottleneck for EPCs is still land and grid readiness, not equipment. Equipment supply has improved significantly, but projects often get delayed because land isn’t fully clear, evacuation infrastructure isn’t ready, or grid approvals take longer than planned.

In addition, policies and subjectivity also surprise EPCs at critical stages of the projects, as the long approval mechanism to commission a project leaves us with many strange unknowns, Col Mishra said. 

Agreeing with him, Avaada’s Nair adds that “Grid Connectivity and ROW for Transmission Lines are the major bottlenecks. While solar panels are plenty, we face a shortage of Extra High-Voltage transformers (400 kV) and switchgear, with lead times exceeding 18 months. Land acquisition remains slow, but it is the mismatch between fast project commissioning and slow transmission buildup—that is the biggest risk for EPCs today.”

Vatsal Kundalia, MD of Advait Green Energy Transition, meanwhile, said that the AC side of BESS offers more challenges for the smooth operation of BESS projects. “The primary technical challenges lie in lifecycle management, including warranty coverage, long-term O&M expenses, and system reliability. While the DC side of BESS is relatively well understood, the AC side—particularly power electronics, grid interfacing, and protection systems—is still new territory for many stakeholders. Failures on the AC side can have significant consequences for system availability and project economics.

Policy Interventions Needed

Most industry experts agreed that India could achieve over 50% domestic content in BESS manufacturing by 2026–27, supported by industry maturation and encouraging market trends. However, they emphasised that this will require a clear tender roadmap, sustained policy support for manufacturers, and a technology-agnostic framework, among other measures, to ensure the sector flourishes with minimal uncertainty.

“Manufacturers don't just need orders; they need a roadmap. A multi-year, transparent tender pipeline is the only way to de-risk heavy CAPEX and give the industry the confidence to build for the long term.  Innovation moves faster than regulation. By remaining technology-neutral, we ensure that the market - not the mandate - picks the winners. The "first-mover penalty" is real. Early-stage risks regarding performance guarantees and safety standards should not rest solely on the shoulders of the developer or manufacturer. We need collaborative risk-sharing frameworks to bridge the gap between innovation and bankability,”Maddisetty from PaceDigitek said. A point seconded by Delta’s Kaushal too.

Misra from AmpereHour advocates that reverse auctions for BESS projects are not sustainable as of now, as the market has not yet matured like solar projects and needs government hand-holding support now. 

"On the demand side, the government has done well. Battery prices fell rapidly last year, enabling many projects. On the supply side, there is significant scope for additional support. Manufacturing and product development can be encouraged through PLIs, tax incentives, subsidised land, or electricity for strategic industries,” Misra said.

When asked about the role of finance and other issues in this market, Akash from GoodEnough said, “First, stronger regulations in tenders—particularly around foreign exchange exposure and forex-linked bidding. Second, faster execution timelines. Battery energy storage projects do not require 18 to 20 months. If tenders are structured with a six-month execution window, outcomes will improve significantly, and projects will move faster.”

Conclusion

Most experts believe that, unlike in 2025, rising lithium and other commodity prices are likely to prevent BESS tariffs from falling further. Instead, as stakeholders gain a deeper understanding of system behaviour and draw lessons from on-ground BESS installations, future tariffs are expected to become more rational and reflective of real costs—rather than driven by headline-grabbing lows. According to Ishan Nagpal, AVP - Regulatory, Bidding and Commercial, Sunsure Energy, a leading EPC, “Many BESS tenders awarded in 2025 were bid under the assumption that raw material prices would continue to soften. As a result, projects scheduled for construction and commissioning in 2026–27 would be facing tighter cost economics, particularly where contracts do not allow for price pass-through or escalation”.

Looking ahead, 2026 is shaping up to be a year of reckoning rather than rhetoric. Success will be defined by disciplined execution, realistic tariffs, and projects that perform reliably over decades—not by headline-grabbing lows. With clearer tender roadmaps, technology-agnostic policies, shared risk frameworks, and deeper investment in R&D and domestic manufacturing, India has the opportunity to build a resilient and bankable energy storage ecosystem. The sector’s next phase will determine whether BESS follows the early excesses of solar—or emerges wiser, stronger, and foundational to India’s renewable future. Nagpal adds that a clear marker of success for India’s energy storage market over the next 12–18 months would be the timely execution and commissioning of projects already awarded. If 70–75% of the BESS tenders issued in 2025 are commissioned within the next two years, it would signal that tender structures, tariffs, and risk allocation are aligned with on-ground realities and execution capabilities.