IEEFA-JMK joint research report warns that aggressive bidding, low tariffs and supply chain dependence could slow India’s battery storage expansion
India’s push towards large-scale energy storage is accelerating rapidly as the country races to achieve its ambitious target of 500GW renewable energy capacity by 2030. However, a new report by Institute for Energy Economics and Financial Analysis and JMK Research and Analytics warns that tariff viability concerns, financing hurdles and execution risks could threaten the sustainability of the country’s booming battery energy storage system (BESS) market.
According to the report, titled “Viability of Standalone Battery Energy Storage Tariffs Discovered in 2025”, India’s cumulative tendered energy storage capacity surged from 6.8GW in 2018 to 90.7GW in 2025, highlighting the rapid scale-up of the sector.
The study reveals that standalone energy storage system (ESS) tenders — where storage projects are contracted independently of renewable generation assets — have emerged as the dominant procurement model in India. In 2025 alone, standalone ESS tenders accounted for over 71% of total energy storage capacity tendered, while standalone BESS projects represented nearly 60% of the capacity.
Standalone BESS dominates India’s storage market
A total of 10.4GW standalone BESS capacity was allocated during 2025, with the 2-hour, 2-cycle configuration emerging as the most preferred model among energy offtakers.
The configuration allows utilities to manage both morning and evening peak electricity demand within a single operational cycle.
“The surge in standalone storage tenders has coincided with declining battery prices and supportive policy measures such as the introduction and expansion of viability gap funding for standalone BESS projects,” said Vasu Mor, co-author of the report.
However, the report notes that the market is gradually shifting towards longer-duration storage systems. Since mid-2025, the 4-hour BESS segment has started gaining momentum due to its ability to address evening peak demand more efficiently.
“Higher single-cycle energy throughput makes 4-hour systems more suitable for grid balancing and peak demand management,” said Mouli Srivastava.
Falling tariffs raise concerns over project viability
Despite the rapid growth, analysts warn that aggressive bidding in recent auctions may undermine project viability.
The report highlights that standalone BESS tariffs witnessed a sharp decline in 2025, with the lowest discovered tariff dropping to INR1.48 lakh per megawatt per month for 2-hour systems.
This is significantly lower than the benchmark tariff estimate of INR2.3 lakh/MW/month considered necessary for financially sustainable operations.
Researchers estimate that nearly 75% of the allocated 2-hour BESS capacity currently falls into the “at-risk” category, suggesting a widening gap between market-discovered tariffs and actual project economics.
The report points out that financially viable outcomes have largely been limited to smaller and early-stage state-led auctions conducted in Karnataka, Tamil Nadu, Telangana and Gujarat.
Industry experts believe the situation may require urgent procurement reforms, including the introduction of cost-reflective tariff floors, stricter bidder eligibility norms and stronger payment security mechanisms to reduce execution risks.
Dependence on Financing and supply chain remain key challenges
The report further warns that financing conditions for standalone BESS projects remain stringent, especially amid declining tariffs and rising battery input costs. Developers could face delays in financial closure, procurement and commissioning, potentially leading to project implementation delays of up to 18 months.
Analysts also caution that cost pressures may encourage compromises in asset quality, affecting long-term project performance and reliability.
“Although near-term challenges may lead to some project cancellations or delays, the eventual growth of ESS is inevitable,” said Prabhakar Sharma.
India had installed nearly 1.8GWh of grid-scale BESS capacity by March 2026, with most of the additions occurring during the last six months of FY2026, indicating that deployment momentum remains strong despite financial headwinds.
Another major concern flagged in the report is India’s heavy dependence on lithium-ion battery technology and China-centric supply chains. Researchers believe this exposes the Indian energy storage sector to global geopolitical and raw material supply risks.
Alternative storage technologies likely to gain traction
The report suggests that Indian tendering agencies may increasingly explore alternative storage technologies such as sodium-ion batteries and flow batteries to reduce supply chain vulnerabilities and improve lifecycle economics.
“Going ahead, the BESS technology landscape will be a diversified mix of storage technologies including lithium-ion, flow batteries and sodium-ion systems,” said Charith Konda.
Experts believe that different technologies will coexist based on use cases, storage duration requirements, safety standards and cost structures.
As India expands renewable energy capacity at an unprecedented pace, the success of its clean energy transition could increasingly depend on how effectively the country addresses the financial and structural challenges facing its rapidly growing energy storage ecosystem.