India’s energy storage sector is facing growing concerns over project viability as tariffs for standalone battery energy storage system (BESS) projects continue to decline below estimated sustainable cost levels, according to a joint report by JMK Research and Analytics and the Institute for Energy Economics and Financial Analysis (IEEFA). The findings highlight the increasing pressure on developers and investors as competition in India’s rapidly expanding energy storage market intensifies.
The report stated that the lowest discovered tariff for two-hour standalone BESS projects in 2025 fell to approximately $1,576.00 per MW per month. This compares with an indicative benchmark cost of $2,448.95 per MW per month, creating a significant financial gap that researchers say may affect project economics and long-term sustainability.
According to the study, nearly 75% of allocated two-hour standalone BESS capacity in 2025 now falls into a risk category because awarded tariffs are below estimated viable cost levels. Analysts warned that such pricing conditions could increase the possibility of delays in financing, procurement, and overall project implementation.
Researchers noted that aggressive bidding strategies have contributed to declining tariffs across the sector. While lower tariffs may reduce short-term costs for utilities and energy buyers, concerns remain about whether developers will be able to maintain profitability while meeting project quality, operational, and delivery requirements over the long term.
The report identified financing as one of the key areas of concern. Lower tariffs may make it more difficult for project developers to secure financial closure, particularly if lenders view project returns as insufficient to offset risks associated with battery procurement, infrastructure development, and long-term operations. Analysts said these challenges may become more pronounced if battery prices or supply chain costs increase unexpectedly.
India allocated approximately 10.4 gigawatts (GW) of standalone BESS capacity during 2025, reflecting the country’s continued push to expand energy storage infrastructure as part of broader efforts to strengthen grid stability and support renewable energy integration. Two-hour, two-cycle systems represented the dominant configuration in the market, allowing operators to charge and discharge batteries twice daily in order to address electricity demand peaks during morning and evening hours.
The report noted that these systems are increasingly important as India continues to add renewable energy capacity to its electricity network. Battery storage systems are viewed as essential tools for balancing fluctuations in renewable generation, particularly from solar and wind sources, which can vary depending on weather conditions and time of day.
However, researchers also highlighted a growing shift in market focus toward four-hour storage systems since mid-2025. According to Mouli Srivastava, Research Associate at JMK Research and Analytics, four-hour systems are gaining prominence because their higher energy throughput is better suited to meeting evening peak demand requirements.
Analysts said longer-duration storage systems may become increasingly important as electricity demand patterns evolve and renewable energy penetration continues to increase. These systems are capable of storing electricity for extended periods, allowing utilities to better manage supply and demand fluctuations across different parts of the day.
The report also warned that execution risks associated with low tariffs could delay implementation timelines for allocated projects by as much as 18 months. Researchers linked these risks to potential difficulties in securing financing, completing procurement processes, and commissioning projects within expected schedules.
Procurement challenges remain another important concern for the sector. India’s energy storage industry continues to rely heavily on global battery supply chains, particularly lithium-ion technology. Fluctuations in raw material prices, shipping costs, manufacturing capacity, and international demand may affect procurement timelines and overall project economics.
The study further stated that sustained pressure to reduce project costs may eventually affect asset quality. Analysts warned that developers operating under tighter financial conditions may face pressure to reduce expenses related to equipment procurement, engineering, or maintenance, potentially impacting long-term project performance and reliability.
Despite these concerns, India’s energy storage market has expanded rapidly over recent years. The report showed that cumulative tendered energy storage capacity increased from 6.8 GW in 2018 to 90.7 GW in 2025, reflecting strong growth driven by policy support, falling battery costs, and increasing electricity demand.
Standalone storage accounted for more than 71% of total capacity tendered in 2025, while standalone BESS projects represented approximately 60% of that share. Researchers said the rapid expansion demonstrates growing confidence in the role of energy storage within India’s power sector, even as developers face increasing financial and operational challenges.
The report attributed much of the market’s growth to declining battery prices over recent years. Lower battery costs have improved the economic feasibility of storage projects and encouraged wider adoption across utilities and developers. In addition, government support measures, including viability gap funding for standalone BESS projects, have helped accelerate project development and market participation.
Policy support continues to play an important role in India’s energy transition strategy. Energy storage systems are expected to help support renewable energy integration, reduce curtailment, improve grid reliability, and strengthen energy security as the country expands electricity generation capacity.
According to Prabhakar Sharma, Senior Consultant at JMK Research and Analytics, approximately 1.8 gigawatt-hours of grid-scale BESS capacity had been installed by March 2026. Much of this capacity was added during the final six months of FY2026, highlighting the accelerating pace of deployment across the sector.
Industry participants continue to monitor whether project execution can keep pace with tender allocations. Analysts noted that large-scale capacity awards do not always translate into immediate operational deployment, especially when projects encounter financing or procurement challenges.
The report also highlighted concerns surrounding the sector’s dependence on lithium-ion battery technology. While lithium-ion systems currently dominate the market because of their established commercial use and declining costs, reliance on a single technology may expose developers to supply chain vulnerabilities and commodity price fluctuations.
Researchers said tendering agencies are increasingly expected to evaluate alternative battery technologies that may offer different advantages in terms of lifespan, operational safety, and cost structure. Among the alternatives identified in the report are flow batteries and sodium-ion systems.
Flow batteries are viewed as a potential option for long-duration storage applications because of their ability to provide stable performance over extended charging and discharging cycles. Sodium-ion batteries, meanwhile, are attracting attention because they may reduce reliance on certain critical minerals associated with lithium-ion production.
Analysts stated that diversification of battery technologies may help reduce supply chain risks over the long term while supporting broader industry resilience. However, many alternative technologies are still developing commercially and may require additional investment and testing before widespread adoption occurs.
India’s energy storage market is expected to remain an important part of the country’s long-term energy strategy as demand for electricity continues to rise and renewable energy capacity expands further. Researchers said the success of future projects will depend on balancing competitive tariffs with financially sustainable project structures that allow developers to deliver projects on time while maintaining operational quality.
The report concluded that while India’s energy storage market continues to experience strong growth momentum, maintaining long-term project viability will remain critical as the sector moves into its next stage of expansion. Analysts added that future auction structures, financing conditions, technology choices, and supply chain developments will likely play a major role in shaping the pace and stability of market growth over the coming years.
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