India’s energy storage market: Bridging the gap between tenders and execution

With the Central Electricity Authority projecting a storage requirement of 411.4GWh by FY2031-32, the challenge is clear: building an ecosystem that can deliver storage at scale, safely and sustainably, while establishing the commercial foundations for long-term private investment. 

Energy-Storage News: How would you characterise the Indian energy storage market today, particularly compared with other international markets? What are the key opportunities and challenges shaping India’s trajectory? 

Vaibhav Singh: India is at a fascinating point in its storage journey. It is no longer an experimental market, but it is not yet as mature as China, the US or Australia in terms of installed capacity, operating experience and the depth of merchant revenue streams. Globally, battery storage added a record 108GW in 2025, an increase of around 40% year-on-year, with China accounting for roughly 60% of additions. India has a much smaller operating base, but its pipeline is expanding rapidly. 

By June 2026, India’s commissioned storage capacity stood at approximately 10.3GW, including around 2.9GW/8.3GWh of BESS, while more than 100GW had been tendered. The gap between tendered and operational capacity illustrates both the opportunity and the execution challenge. 

What distinguishes India is that storage demand is being driven by a structural change in the electricity system, rather than solely by arbitrage opportunities. The question is no longer whether storage will be needed, but how quickly the ecosystem can finance, manufacture, build and operate that capacity intelligently. 

India also has several advantages. It can benefit from the cost reductions and technological advances already achieved in China and other markets, rather than having to develop the industry from scratch. Meanwhile, demand can be supported by a broad range of applications, including evening peak shifting, renewable energy firming, firm dispatchable renewable energy (FDRE), ancillary services, network congestion relief and commercial and industrial (C&I) applications. The government is accelerating the transition through viability gap funding (VGF), storage obligations and transmission-related policy support. 

The principal risk is that procurement growth is outpacing the maturity of the industrial ecosystem and financial markets. 

The Institute for Energy Economics and Financial Analysis (IEEFA) and JMK Research found that cumulative tendered energy storage system (ESS) capacity [in India] had reached 90.7GWh by 2025, with 10.4GWh of standalone BESS allocated that year. However, nearly three-quarters of the allocated 2-hour capacity was assessed as potentially at risk at the discovered tariffs.

This indicates that the next phase should not simply focus on announcing more gigawatts, but on converting the substantial pipeline into bankable, technically robust and operational assets. 

What are the key bottlenecks in translating awarded tenders into executed projects and getting BESS built and operational? What needs to change to accelerate project delivery? 

The biggest issue, in my view, is the difference between winning a tender and developing a financeable project. Competitive auctions have delivered remarkable price reductions, but in some cases these have outpaced underlying cost reductions. 2-hour and 4-hour standalone BESS tariffs fell by more than 80% between 2022 and 2026, compared with a reduction of only around 40% in battery-pack prices. 

As there were no technical qualification criteria, almost half of the allocated capacity was awarded to players without standalone BESS execution capabilities. This creates a genuine risk that overly aggressive tariffs will lead to delays, attempts to renegotiate specifications, financing constraints or compromised returns. This is no longer a theoretical concern, with NTPC having cancelled awarded capacity. 

The second bottleneck is the project-development process itself. Storage may appear simpler than a generation project because it requires relatively little land, but a BESS still needs land, connectivity, evacuation infrastructure, statutory approvals, a bankable offtake agreement, equipment procurement and successful commissioning. 

Lenders must also assess unfamiliar battery-related risks, including degradation, augmentation, cycling limits, availability guarantees and residual life. The market is shifting from policy-led procurement towards bankable execution, where supply readiness and lifecycle economics are as important as headline tariffs. 

Supply chain exposure is another significant challenge. India remains heavily dependent on imported cells, while procurement contracts often span 12–15 years. Developers therefore face risks relating to cell prices, foreign exchange, supplier warranties and long-term servicing. These risks are particularly acute when bidders commit to highly competitive tariffs based on anticipated equipment-price reductions that fail to materialise. 

A successful auction should therefore select not just the lowest bid, but a credible combination of price, technology, financing capability and delivery experience. 

Policy has already moved in the right direction. Under the VGF scheme, the commissioning period was reduced to 18 months, contract periods were extended to 12–15 years, and 70% of VGF is designed to be released by the commercial operation date (COD). 

Further improvements could include standardised bid documents, firm connectivity before or shortly after award, stronger payment-security arrangements, realistic qualification criteria, clear rules on change-in-law and import-duty exposure, and closer monitoring of project milestones. These measures would help narrow the gap between tender award and COD. 

Now that some projects have been completed, what is changing in revenue models, operations and optimisation? What does BESS asset management in India look like today, and how do you see it evolving as more assets come online? 

The first generation of Indian BESS projects was largely about demonstrating that batteries could be integrated into the grid. The next generation will focus increasingly on extracting maximum value from every available megawatt-hour and battery cycle. 

Most tendered assets remain anchored to contracted capacity or storage charges, providing the cash-flow predictability lenders require. However, as the market evolves, a battery’s economic value could increasingly come from multiple applications, including peak shifting, energy arbitrage, renewable energy firming, ancillary services and, depending on the regulatory framework, network-support services. 

Perhaps the most important development in the operating market is the rise of merchant BESS. India is moving from a predominantly contracted market towards a more diverse mix of contracted, merchant and potentially hybrid revenue models. Merchant assets are particularly significant because they shift the economics of storage from simply earning availability or capacity payments to actively monetising flexibility. 

Merchant or merchant-exposed projects now account for close to half of India’s installed BESS capacity, with successful commissioning by players including Adani, ACME Solar and Juniper Green. 

The evolution of BESS has also led to more sophisticated asset management practices. Unlike conventional solar or wind assets, where the primary objective is to maximise generation and availability, BESS asset managers must optimise state of charge (SoC), depth of discharge (DoD), cycling frequency, degradation, augmentation, efficiency and market value simultaneously. 

Using a battery today carries an opportunity cost because the same cycle may be more valuable several hours later. Excessive cycling can also accelerate degradation. Asset management is therefore becoming both an engineering discipline and a trading and optimisation discipline. 

Storage durations are gradually increasing from the historically dominant two-hour configuration towards four hours and beyond. India is likely to follow a similar trajectory, although contracted models will remain important as the market develops. 

Over time, I expect a specialised BESS operating ecosystem to emerge around energy-management systems, forecasting, algorithmic dispatch, battery-health analytics and portfolio optimisation. 

The key operating metric will increasingly shift from “Was the battery available?” to “Did we use each cycle to achieve the highest risk-adjusted value while preserving long-term battery health?”

This distinction will become increasingly important as India’s operating fleet grows and asset owners accumulate several years of degradation and dispatch data. 

What are the key considerations for ensuring the safety of BESS installations? How can developers address community concerns and reassure residents living near these assets? 

Safety must be treated as an engineering philosophy extending from the individual cell to the site’s emergency-response arrangements, rather than as a certification exercise at the end of construction. 

It begins with high-quality cells and modules, supported by robust battery-management systems, thermal management, electrical protection, gas and smoke detection, fire protection, appropriate segregation and measures to prevent thermal-runaway propagation. India’s regulatory framework is also becoming more formalised: the CEA notified dedicated BESS safety provisions in March 2026, with the new requirements scheduled to take effect in April 2027. 

A key principle is that cell-level compliance cannot be treated as proof that an entire installation is safe. Developers should assess safety at cell, module, rack, container and site levels. Internationally recognised frameworks, including IEC 62619, the IEC 62933 series and UL 9540A testing, provide useful reference points alongside applicable Indian regulations and BIS standards. 

Thermal runaway must be treated as a credible failure mode. The design objective should be to detect it early, isolate the affected equipment, prevent propagation and protect first responders. 

Simply telling customers that a plant “meets standards” is unlikely to reassure them. Developers, EPCs and integrators should explain what the installation contains, which prevention systems are in place, how fires and other emergencies would be managed, and whom residents can contact. 

Local fire departments and disaster-management authorities should be familiar with the installation before commissioning, not after an incident. Site-specific emergency drills and clearly defined response protocols can significantly improve preparedness and public confidence. 

As gigawatt-hour-scale capacities are installed, even one poorly managed safety incident could undermine confidence in the wider BESS industry. This is particularly important as the next phase of growth extends into C&I applications and kilowatt-hour-scale deployments through BESS-integrated rooftop systems. 

Installers therefore have an incentive to go beyond minimum compliance where appropriate, establishing transparent safety governance, independent inspections and incident-reporting procedures. In the storage sector, public acceptance ultimately depends on visible preparedness and operational discipline. 

Given India’s current reliance on imports, what will it take to build a more self-reliant energy storage ecosystem? What are realistic timelines for domestic manufacturing to scale, and what interventions are needed? 

India should distinguish between localising a BESS and localising the entire battery value chain. 

Containers, structures, transformers, switchgear, cabling, parts of the power conversion system (PCS), pack assembly, system integration and software can be localised relatively quickly. Cell manufacturing, particularly upstream materials such as cathode and anode active materials, electrolytes and separators, is much more challenging. It requires scale, process know-how, intellectual property, specialised equipment and secure supplies of critical minerals. 

The figures illustrate the scale of the challenge. The government’s production-linked incentive (PLI) scheme for the advanced chemistry cell (ACC) battery storage programme has an outlay of INR 181 billion (US$1.9 billion), targeting 50GWh of manufacturing capacity. 

As of March 2026, 40GWh had been awarded, but only 1GWh of PLI-backed capacity had been installed. The government also stated that domestic demand continued to be met largely through imports. The Ministry of Heavy Industries has subsequently moved to tender the remaining 10GWh specifically for grid-scale stationary storage applications. 

Significant localisation of pack assembly, BMS/EMS, system integration and balance-of-system equipment is achievable during this decade. Domestic cell production should also expand as announced gigafactories ramp up, but complete upstream self-sufficiency will take considerably longer. 

Wood Mackenzie has estimated that India remains roughly 10–15 years away from a globally competitive, self-sufficient cell industry, despite more than 226GWh of announced manufacturing capacity through 2035. Its analysis also suggests that locally produced cells could initially cost 25–40% more than imports because of disadvantages relating to scale, financing and the wider industrial ecosystem. 

Policy should therefore prioritise competitiveness rather than localisation for its own sake. Further interventions need to strengthen domestic capabilities in active materials, separators, electrolytes, recycling, testing, R&D, skilled manpower and critical-mineral security. 

The ACC PLI requirement to increase domestic value addition from at least 25% to 60% within five years is a useful step. The long-term objective should be an Indian supply chain that competes on cost, quality and technology, rather than one that depends indefinitely on import barriers. 

How should India balance its requirements for short-duration and long-duration energy storage? Is there room for emerging technologies beyond lithium-ion batteries and pumped hydro storage to play a meaningful role in the market? 

India does not face a choice between short-duration and long-duration storage; it needs both to address different power-system requirements. 

BESS at 2-hour to 4-hour durations is particularly well suited to shifting afternoon solar generation to morning and evening peaks and providing fast-response grid services. Pumped hydro and other long-duration technologies become increasingly valuable when the requirement extends to overnight balancing, prolonged renewable-energy shortfalls or multi-day system flexibility. 

The CEA’s planning figures already reflect this portfolio approach. Storage requirements are projected to rise from around 82GWh in FY2026-27 to 411GWh by FY2031-32, comprising approximately 175GWh of pumped storage and 236GWh of BESS in the latter year. 

India’s tender market is also evolving. 2-hour, 2-cycle configurations dominated standalone BESS allocations during 2025, but JMK Research observed growing interest in 4-hour systems during the second half of the year. 

Beyond lithium-ion and pumped hydro, there should be scope for technologies such as flow batteries, sodium-ion batteries, thermal storage, compressed-air and other mechanical storage systems, as well as hydrogen-derived storage for applications requiring very long durations. 

However, these technologies should not all be forced into the same procurement structure. The LDES Council (trade association) describes long-duration energy storage as spanning roughly eight hours to applications lasting days, weeks or even seasons, and identifies electrochemical, mechanical, thermal and chemical pathways. 

The better policy approach would be technology-neutral but service-specific procurement. Rather than prescribing battery chemistry, procurers could specify discharge duration, response time, availability, cycling requirements and delivered-energy performance. Technologies could then compete for the applications best suited to their capabilities. 

This would help India avoid prematurely committing to a single technological winner while encouraging innovation beyond lithium-ion. 

What role will the Union government continue to play through initiatives such as Make in India, VGF and capital expenditure support? As the market matures, what will it take for the private sector to assume a greater share of investment risk over the long term? 

The government’s role at this stage is fundamentally one of market creation and risk reduction. Storage creates value for the wider power system, but not all of that value can yet be monetised easily by individual projects. 

This is why instruments such as VGF, Energy Storage Obligations, competitive procurement guidelines and manufacturing incentives have been important. They bridge the gap between storage being economically valuable to the system and projects becoming fully financeable through market revenues. 

The scale of public support is significant. The June 2025 PSDF programme provides INR 54 billion in VGF at INR 1.8 million/MWh for 30GWh of BESS, with 25GWh allocated to 15 states and another 5GWh to NTPC. Separately, the CEA indicates that the various VGF components together support around 43.85GWh of BESS. On the supply side, the INR 181 billion ACC PLI programme follows a similar approach to accelerate domestic manufacturing. 

However, the objective should not be to make storage permanently dependent on subsidies. 

The logical progression is from government-supported deployment to contracted private investment, followed by hybrid contracted and merchant models, and ultimately a greater assumption of market risk. 

For this to happen, investors need predictable power-market rules, functioning ancillary-service markets, stronger price signals for flexibility and creditworthy offtakers. Lenders also need sufficient operating history to assess degradation, residual value and augmentation with confidence. 

In the long run, government support should shift from funding individual assets towards creating a market framework that rewards flexibility. Where storage can earn adequate returns from capacity availability, arbitrage, ancillary services or network value, private capital should assume the investment risk. 

Public funding can then be increasingly targeted at early-stage technologies, long-duration storage, manufacturing capabilities and other areas where genuine market failures persist. 

What are the most pressing barriers to the growth and development of India’s energy storage market today, and what needs to happen to address them? 

The barriers fall into five areas: bankability, execution, market design, supply-chain depth and operating capability. 

India has demonstrated its ability to generate substantial interest in auctions. The greater challenge is ensuring that awarded tariffs support sustainable projects. The most striking warning sign comes from the 2025 standalone market, where the lowest two-hour tariff fell to around INR 148,000/MW/month, compared with an indicative viability benchmark of approximately INR 230,000/MW/month. Around 75% of allocated two-hour capacity was assessed as potentially at risk. 

Execution is the second challenge. India’s storage pipeline exceeded 100GWh by June 2026, but commissioned capacity was only approximately 10.3GWh, meaning that less than one-tenth of tendered capacity had become operational. 

The answer is not to slow procurement, but to make project delivery more reliable through better qualification criteria, timely connectivity, standardised contractual provisions, clearer accountability for milestones and procurement timelines aligned with realistic equipment and financing lead times. 

Third, the market must move beyond treating storage as an asset providing a single service and recognise the value of the different services it can deliver. Energy shifting, fast response, reserves, congestion management and capacity availability represent distinct forms of flexibility. 

Regulatory frameworks must enable efficient participation while avoiding double compensation. As the market develops, sophisticated forecasting, dispatch optimisation and battery-health management will become major sources of competitive advantage. 

Finally, India needs to strengthen the ecosystem surrounding the physical battery, including domestic manufacturing, testing facilities, lender expertise, trained operating personnel, insurance expertise, recycling and robust safety capabilities. 

The encouraging point is that most of these barriers are characteristic of an emerging infrastructure asset class, rather than evidence of weak underlying demand. 

The next five years will therefore be less about proving that India needs storage and more about demonstrating that it can build and operate storage at scale, safely, competitively and profitably.

Singh will speak at this week’s Energy Storage Summit India 2026, taking place on 22–24 October at India Expo Mart in Greater Noida, Delhi NCR. Running alongside the Renewable Energy India Expo and The Battery Show India, the event will bring together developers, utilities, policymakers and global technology providers. ESN readers can receive 50% off last-minute tickets using code ESSI50 at checkout.