India Needs ₹1.4 lakh crores to Build Targeted BESS Capacity by 2030, Says ICRA

Falling battery prices, supported by the government's Viability Gap Funding (VGF) have made Battery Energy Storage System (BESS) increasingly cost-competitive, driving momentum in standalone storage and solar-plus-storage tenders and lowering tariffs significantly. According to ICRA, this ensures dominance of BESS over Pumped Storage Hydropower (PSP) till 2030, post which, planned PSP projects will also start to pull their weight. 

ICRA projects an investment requirement of around Rs.1.4 lakh crores for BESS capacity addition by 2030, reflecting the scale of opportunity and commitment needed to support renewable integration.

A latest ICRA report noted a significant growth in India's renewable energy (RE) capacity, which is projected to rise significantly over the current decade. It noted an increase in the RE power share—including large hydro—to about 40% of total electricity generation by FY2030 from the current 27%. Achieving this ambitious target will require robust energy storage systems (ESS) to address the intermittency of wind and solar power. 

2 Hr & 4 Hr BESS See Drop Compared To PSP projects 

Based on prevailing battery costs, the levelised storage cost using BESS for 2 hours to 4 hours of storage is estimated to be relatively high in the range of Rs. 4.0-7.0 per unit against Rs. 5.0 per unit in case of PSP projects. These prices have seen a drop from over Rs. 8.0-9.0 per unit seen in 2022.

Comparing the cost for 2 Hour and 4 Hour BESS projects, the report mentioned that while storage cost remains high for BESS for 4 Hour storage compared to PSP, the execution risks and gestation period for the BESS projects remain relatively low compared to PSP projects which can take over 5 years to build. 

On the other hand, BESS projects have a relatively shorter life span and require replacement capex. Overall, a sustained reduction in battery prices and a relatively low gestation period for the BESS projects are expected to support their greater adoption in the overall energy storage mix, going forward.

VGF & Solar+BESS Mandates Drive Down BESS Costs

Over the past decade, global battery pack prices have fallen to record lows, making battery energy storage systems (BESS) far more cost-effective and driving down tariffs for standalone storage as well as solar-plus-storage projects.

Additionally, the government support through the Viability Gap Funding (VGF) scheme for a cumulative capacity of 30 GWh and the government’s mandate for new solar projects to include at least 10% storage capacity has resulted in competitive tariffs to gain momentum in this space.

This is further supported by the growing need for grid stability and peak load management as renewable penetration rises, positioning BESS as one of the key elements in India’s clean energy transition

What are the key risks for BESS? 

Key risks for BESS implementation in India include a limited track record of successful execution, minimal domestic manufacturing capacity, and a shortage of large-scale EPC players. In short, exactly where Solar was back in 2018 or so. High dependence on China, with a challenge to build local capacities due to low prices and lack of expertise.

These factors increase dependence on overseas vendors, thereby amplifying execution risks. Furthermore, heavy reliance on imported lithium-ion components exposes projects to supply chain disruptions and potential cost escalations.

In addition, during the operational phase, challenges could arise in meeting stringent performance benchmarks, strict penalties for delays or underperformance, and the need for specialised experts during on-ground operations.