Batteries are emerging as a key tool in India’s power transition, offering a flexible solution to the challenges of a high-renewables grid. From storing low-cost solar and wind energy to supporting real-time grid stability, battery energy storage systems (BESSs) are unlocking innovative ways to optimise the overall electricity system. With rising renewable capacity and declining battery costs, new business models are gaining traction, particularly participation in the wholesale power and ancillary services markets. Policy support and a slew of auctions have further given an impetus to the BESS market in the country.
Policy and auction landscape
The growth of BESSs is being reflected in India’s 2025 standalone auction landscape. Since January 2025, nearly a dozen standalone tenders have been auctioned, supported by the central government’s viability gap funding (VGF) programme and complementary state-level initiatives. Launched in 2024 with an initial target of 4 GWh, the VGF scheme was scaled up to over 40 GWh by mid-2025, backed by an outlay of Rs 54 billion, and is expected to mobilise Rs 330 billion in investments by 2028. This has significantly improved project economics, drawing strong participation from various stakeholders.
India’s recent standalone BESS auctions have highlighted distinct tariff patterns influenced by VGF support and storage design, as demonstrated in the table. The discovered tariffs for two-hour storage projects, including both VGF- and non-VGF-based tenders, ranged between Rs 208,000 per MW per month and Rs 280,000 per MW per month. The winning bidders comprised a diverse mix of established renewable energy developers, engineering firms and new entrants, highlighting growing competition and confidence in the BESS segment. NHPC Limited’s VGF-backed tender for 500 MW/1,000 MWh capacity recorded the lowest bid at Rs 208,000 per MW per month. Meanwhile, GUVNL’s non-VGF 500 MW/1,000 MWh tender discovered a tariff of Rs 280,000 per MW per month.
Longer-duration projects with a four-hour storage capacity have also been auctioned during the year. These projects yielded higher tariffs than their two-hour counterparts, mainly due to the doubling of the storage requirement. The tariffs for such projects ranged from Rs 359,000 per MW per month to Rs 444,000 per MW per month for SJVN Limited’s VGF 375 MW/1,500 MWh capacity auction and BSPGCL’s VGF 125 MW/500 MWh capacity auction respectively.
Future outlook
The surge in auctions reflects the growing importance of large-scale energy storage in the Indian power system. While BESSs are gaining traction in renewable energy projects to provide firm generation, utilities on both the transmission and distribution sides are also now opting for energy storage solutions to effectively manage their grids.
A recent report by EMBER titled “The Age of Storage: Batteries Primed for India’s Power Markets” highlights that day-ahead electricity prices are increasingly volatile, often dipping during solar-rich hours and spiking during evenings and nights. Amid these dynamics, BESSs can charge when prices are low and discharge during peak periods, generating revenue, smoothing market fluctuations, improving grid stability and enhancing renewable utilisation by reducing curtailment and limiting inefficient coal plant cycling. As per industry expectations, in the near term, two-hour storage projects will continue to dominate, providing immediate solutions for evening peaks and short-term balancing requirements. However, in the long term, four-hour and even longer-duration systems are expected to gain ground due to the evolving grid needs and advancing market design.
According to the National Electricity Plan published by the Central Electricity Authority, India will require 47.24 GW/236.22 GWh of BESS by 2031-32. The pace of deployment will depend heavily on how effectively the policy and regulatory framework evolves in the coming years. As per a recent study titled “Strategic Pathways for Energy Storage in India through 2032” the country is well placed to meet its clean energy goals without increasing costs, provided adequate storage is deployed. Refining the resource adequacy framework to recognise the role of storage across durations and geographies, along with enabling revenue stacking through energy arbitrage, ancillary markets and capacity contracts, will be essential to make storage commercially viable. Further, strengthening domestic manufacturing through production-linked incentives, ensuring local raw material availability and developing a national battery recycling ecosystem will be critical to reduce import dependence and build a sustainable industry base.
All in all, the outlook for the BESS market remains highly positive. Falling battery costs, competitive tariffs and strong policy support are expected to drive battery storage deployments. The flurry of auctions in 2025 shows that storage is moving beyond a supplementary role to emerge as a central driver of the energy transition.
