BESS Price Signals- Time To Be Wary Of Rising Risks

Early this month, the record low bids of  Rs 1.77 lakh per megawatt (MW) per month in Rajasthan's BESS tender attracted a lot of atttnion. The bids had comfoortably beaten the Rs 2.08 /lakh benchmark set by Andhra Pradesh. With over 50 bidders, the Rajasthan tender was eventually awarded to 11 firms.  Now, an upcoming tender from Maharashtra for a 2000MW/4000MWh BESS  project is already in the spotlight for the bids it will attract.  The pressure is already telling as many of the larger players we spoke to expressed plans to keep away or bid conservatively, considering the risks that are increasingly looking bigger on the horizon. The many new players entering the market have also raised apprehensions owing to their lack of experience with large BESS projects, or over optimistic projections.   

Many of the players sitting out have seen the same story play out before. From solar tenders in 2018-19 that landed in serious trouble during the pandemic, when prices that had been dropping for over 5 years suddenly reversed, to the BESS projects we have been seeing in the past 12 months, where the story is the same. The common factor? China, and its dominance in these sectors.

The Factors In Favour 

Players indicate that the record prices have been seen in BESS tenders with viability gap funding that covers over 15% of costs, providing a safety valve of sorts. 

Add to that the requirement of PPAs that typically look at a 12 year period, again providing some margin of safety for developers as battery lives today can comfortably cross 15 years and more, based on newer technology. India's current BESS guidelines still follow 4-5 year old benchmarks, giving a lot of leeway to players for now. 

The tender designs have also been done to make the risk of default in delivery conditions less onerous, with added flexibility. 

Most importanly, the best prices have been achieved by states or in SECI's case central agencies that have a relatively clean payments record for timely payments.  

The Risks 

The Policy Risk from China: Last month, China introduced export controls on the transfer of technology for the most advanced batteries of 300 Wh/KG or higher. For now, this will not impact the requirements of the Indian market. That is because the most in demand LFP cells like 314 Ah offer under 200 Wh/kg, well under the 300 Wh/kg limit

On top of that, from Q4 of 2025, China will end its export tax rebate of 13% VAT on both solar modules and storage systems, which will build pressure for price increases.

Input Material Costs: With a 90% share of the LFP market, any sharp rise in input materials like Lithium carbonate will also lead to pressure on prices. Keep in mind that when module prices rose sharply during the pandemic, many chinese manufacturers went back on signed contracts, something they could do due to the nowledge that the buyers really had no other option. The current BESS market is no different, with Chinese manufacturers possibly even more dominant than the module makers in 2020.  Firms will do well to remember how Lithium prices shot up as recently as 2021-22 by over six fold, before collapsing post 2023.     

Rajesh Srivastava, Country Director at Narada, a leading Chinese storage firm that has won some key orders in India, quoted a Wood Mackenzie report to warn of rising prices recently on Linkedin.  

Bargain hunting risks:  

And then there is the old Indian bet on bargain hunting. It is no secret that the Chinese market itself is hyper competitive, with no shortage of players offering the same specifications at wodely varying costs. For Indian buyers, that is just fine, as they love to seek deals and bargains. The Problem with BESS is that going beyond the tier-1 manufacturers comes with a real risk of performance later, as the products are intrinsically much more complicated. Bargain hunting for cheap components, be it battery cells, fire detection and protection, cables or even BMS is a real risk that can mess up project economics if things go wrong.

Policy Risk From India . It is obvious that for tenders being allocated, for now, little to no sourcing will happen from domesic manufacturers, many of whom will have their plants up and running by early 2027. As they are expected to be higher priced than Chinese imports, the risks of policy moves in India to shift buying towards Indian manufactirers is real, and even if developers are safe from that, in the long term project delays will prove to be susceptible to tougher regulatory action.

Conclusion: While rising prices is a real risk, for now, developers seem to have the buffer to ride out a minor rise, even as the overwhelming hope is to see prices drop even further in time. However, developers with ready access to finance and the ability to take deliveries faster from China will be at an advantage, as speed has never been more important than now to protect against price risks. According to ICCSino, a Shanghai based consulting organisation for the sector, between January to September 2025, China's new overseas ESS orders/cooperation deals have soared to a staggering 214.7GWh, marking a 131.75% YoY increase. These orders, spread all over the world are the ones that look safe from any prce risks, as they are completed for delivery by mid-2026. Orders booked now for delivery in 2027 would bear the brunt of contract risks, of things were to go south from here.