Policy Support: Driving growth in the energy storage market

India aims to develop 500 GW of ins­tall­ed clean energy by 2030, with 420 GW of solar- and wind-based power. How­ever, as solar and wind are intermittent so­urces of power, grid stability has beco­me a major concern. To address this, there is a need for sufficient storage capacity to improve power quality and avoid issues such as frequency deviations. To increase the uptake of different storage technologies, several policy and regulatory initiatives have been implemented.

Renewable Watch provides a brief over­view of these initiatives…

Key developments

Energy storage systems, including battery energy storage systems (BESSs), pumped hydro energy storage (PHESs) and other technologies such as green hydrogen or green ammonia storage, are expected to see exponential growth in the next few years. According to NITI Aayog, the annual market for stationary and mobile batteries in India could range between $6 billion and $15 billion by 2030, with almost $12 billion from cells and $3 billion from pack assembly and integration. India has 50-100 MW of BESS storage in 2022-23. However, ac­cording to the Central Electricity Authority’s (CEA) projections, India needs to develop BESS capacity of 51-84 GW, with a potential to operate for five hours.

Several policy and industry initiatives are being implemented to encourage market growth. In 2022, the Ministry of Power (MoP) released the energy storage obli­ga­tion (ESO), which mandates the procurement of 1 per cent electricity from solar and wind projects with storage ca­pa­city in 2023-24 until 2029-30. The ESO requirement will be raised on a yearly basis. Hence, in 2029-30, the MoP will require buyers to procure 4 per cent of their total electricity from solar and wind projects with storage capacity. However, considering the low compliance with renewable purchase obligations, the success of this policy route remains uncertain.

The auction for the first stand alone battery storage tender was also concluded in 2022. In September 2022, JSW Renew En­ergy Five Limited won the auction held by the Solar Energy Corporation of India (SECI) to set up 500 MW/1,000 MWh sta­nd alone BESS projects under the build-own-operate-transfer model by quoting Rs 1.08 million per MWh per month.

In December 2022, Greenko Energies won NTPC Renewable Energy’s reverse au­ction to provide energy storage. Gr­eenko quoted a bid of Rs 2.79 million per MW per year for a 500 MW/3,000 MWh PHES plant and won the total ca­pacity. NTPC Renewable Energy plans to use the en­ergy storage facility to meet its round-the-clock renewable energy needs with a wind-solar profile.

In addition, SECI has requested proposals for research and development to de­monstrate scalability in gravity-based or mechanical ESS, green hydrogen-based ESS, including any other non-electroche­mical ESS technology, among pilot clean energy projects. SECI stated that the storage capacities of projects must be up to 500 kWh with a suitable solar generation sy­stem in place. Furthermore, India is ex­pected to launch a Rs 216.5 billion sche­me to encourage the installation of grid-sc­ale BESSs.

The Ministry of Heavy Industries also ex­tended production-linked incentives (PLI) worth Rs 181 billion for setting up advan­ced chemistry cell facilities in India. It aw­ar­ded incentives to Reliance New En­ergy Li­mited, Ola Electric Mobility Private Limi­ted and Rajesh Exports Limited. In addition to capacities allocated by the Ministry of Heavy Industries under the PLI sche­me, private players are expected to create battery manufacturing capacity of approximately 95 GWh. Under the ACC PLI programme, the manufacturing facility will have to be set up within a period of two years. The incentive will be disbursed th­ereafter, over a period of five years, on the sale of batteries manufactured in India.

To promote the commissioning and optimum utilisation of storage projects, the ce­ntral government, in 2021, issued the waiver of interstate transmission system (ISTS) charges for the transmission of electricity supplied by hydro pumped storage and BESS projects commissioned till June 30, 2025. For this, at least 70 per cent of the annual electricity generation require­me­nt for pumping water at a pumped storage plant (PSP) has to be met through solar- and wind-based generation. The ISTS ch­arges for power supplied from hy­dro PSPs or BESS projects will be levied gradually – 25 per cent of short-term open access (STOA) charges for the initial five years of operation, after which charges will be in­creased in steps of 25 per cent every third year until they reach 100 per cent of STOA charges from the 12th year onwards. These charges will also be aligned with the gradual reduction in tariff and payment of debt. The order also mandates the waiver of transmission charges for trading electri­city generated/­supplied from solar or wind plants, PSPs or BESSs in the green term-ah­ead market and the green day-ahead market until June 30, 2023.

Policy interventions for pumped storage

The CEA estimates that the potential of on-river pumped storage in India is 103 GW. Apart from this, there is potential for off-river pumped storage, which is being as­s­essed. To identify and evaluate such po­tential, suitable support will be extended. Currently, eight projects (4,745.6 MW) are in operation, four projects (2,780 MW) are un­der construction, and 24 projects (26,630 MW) have been allotted by states and are at different stages of development. The draft National Electricity Plan, pu­blished by the CEA, indicates that 18.8 GW of PSPs and 51.5 GW of BESSs will be required to integrate the planned renewa­ble energy capacity addition until 2032.

Pumped storage has started to receive significant policy attention. In February 2023, the MoP released the draft guidelines to promote the development of PSPs in the country. According to the gui­de­li­n­es, PSPs may be supported th­ro­ugh concessional climate finance. In ad­d­i­tion, pro­ceeds from sovereign green bonds may be deployed in the development of PSPs that utilise renewable energy for ch­ar­ging. Moreover, PSPs will be exempt from the liability of free power. The gui­delines have suggested the use of abandoned coal mines for such projects. The state governments may consider reimbursement of SGST on hydro­power project components. In addition, they may exempt land acquired by off-river PSPs from payment towards stamp duty and re­gistration fees. Also, if government land is available, it may be provided to developers on an annual lease rent basis.

While PSPs have been declared as renewable energy sources, concessions that are available to other renewable energy sources do not apply to PSPs. For ins­tan­ce, PSP components continue to be taxed at a GST rate of 18-28 per cent, whereas GST on renewable energy sources such as solar and wind is only 12 per cent. In fact, stakeholders in the solar and wind industry are still demanding lower GST rates for their segments.

In the recently notified Electricity (Amen­d­ment) Rules, 2022, the government has re­duced the timeline for granting approval to hydropower plants and off-river PSPs to 150 days and 90 days respectively.

Earlier, in March 2019, the government had issued an order outlining various policy measures to promote the hydropower se­ctor in India. It had declared large hy­dropower projects, including pumped sto­rage projects with a capacity of more than 25 MW that came into commercial operation after March 8, 2019, as a renewable energy source. It had also specified a hydro­po­wer purchase obligation within the non-so­lar renewable purchase obligation. Later, in 2021, the MoP issued detailed guidelines for providing budgetary support to­wards the cost of enabling infrastructure such as roads/bridges and flood moderation components of hydroelectric projects, including PSPs.

Regarding the deployment of PSPs, there are issues related to suitable site selection, finalisation of the project layout, op­e­rating limitations during monsoon, ma­chine selection and equipment supply timelines. The monopoly in equipment su­pply and limited financing options also impede the adoption of PSPs. Onstream PSPs require the construction of large da­ms and reservoirs, which can impact the natural water system. Further, environmental concerns as well as rehabilitation and resettlement issues often adversely im­pact the ti­mely completion of projects involving large dams and reservoirs. Long planning lead times and high construction costs are ma­jor challenges in the growth of the segment. In the case of off-river PSPs, there are issues with respect to the availability of water for initial filling of reservoirs.


Net, net, shifting from conventional fossil fuel-based energy to intermittent renewable energy entails the development and deployment of energy storage technologies in order to ensure grid stability and power quality. The government and regulators have taken several policy steps to promote the uptake of different storage technologies.

Overall, PSPs are emerging as a dark ho­rse among energy storage solutions. They are environment-friendly, pose no waste disposal challenges, depend less on imported components, have longer and reliable discharge durations, provide an­cillary services to the grid, and offer a cost-effective technology considering life cycle costs.

By Sarthak Takyar