Battery bottleneck threatens India’s renewable energy ambitions

In part in order to reduce its heavy reliance on imported energy, India has an ambitious plan in place - a renewable energy capacity of 500 gigawatts (GW) by 2030. Achieving this target, however, depends on the speed and scale of the deployment of energy storage projects, according to a new report by the JMK Research and Analytics and Institute for Energy Economics and Financial Analysis (IEEFA).

The country’s total tendered energy storage capacity has expanded significantly from 6.8GW in 2018 to 90.7GW in 2025. Tenders related to standalone energy storage system (ESS), which contract storage capacity without being tied to any specific renewable generation entity, have turned out to be the most dominant segment. ESS makes up about 71% of total capacity tendered over the last year, with standalone battery energy storage system (BESS) projects making up 60% of this total.

The report by JMK Research and IEEFA looks into the outcomes seen in standalone BESS tenders in India, and examines the factors impacting tariff discovery, while evaluating economic viability under the present market situation, and mapping the near-term outlook for the deployment of standalone energy storage.

The report claims that of the 10.4GW of standalone BESS actually allocated, the 2-hour, 2-cycle configuration with a 12- year contract tenor was the most prevalent, representing 57% of the total allocated capacity. The cost of storage, or tariffs, paid by procurers such as distribution companies, power generation companies or central agencies like the Solar Energy Corporation of India Ltd (SECI) to BESS developers, reduced significantly with the lowest discovered tariffs hitting INR148,000 per megawatt per month ($1,576) for 2-hour systems, and INR285,000 per MW per month ($3,035) for 4-hour systems.

The momentum related to procurement has been robust. However, despite this momentum, the economic viability of the 2025 standalone BESS bids remains a vital point of concern. Against a benchmark tariff of INR230,000/MW/month ($2,449) for the two-hour, two-cycle set up, almost 75% of allocated capacity in this segment can be categorised as risk, the report says.

In contrast, the four-hour segment seems comparatively more viable, with more than two third of the allocated capacity in line with the benchmark tariff. In the second half of 2025, tariff decline gathered pace with many large-scale tenders awarded at very low prices, indicating speculative bidding behaviour.

Project realisation is further constrained by execution risks. Between 2022 and 2025, tariffs dropped by more than 71%, much higher than the 36% decline in the prices of battery packs over the same period, pointing to a widening divergence between tariffs and the underlying cost structures. Last year, prices for lithium carbonate, a vital input in lithium iron phosphate (LFP) cell manufacturing, in China rose sharply; and now the phased removal of export rebates from April 2026 is expected to further increase landed battery costs in India, the report says.

The report argues that capabilities of project developers remain uneven, with less than half or only 46.3% of allocated capacity awarded to players with standalone BESS execution capabilities. The conditions prevailing for financing also remain conservative as lenders invariably expect internal rates of return (IRR) in the range of 15–20%.

To this end, execution risks in standalone BESS are likely to have wider implications for the sector, the report adds, saying that about nine to 18 months of delay in implementation may continue because of issues related to financial closure, procurement and commissioning. Cost pressures at lower tariffs is also a likely result in compromised asset quality, system reliability and safety.

Combined, these challenges have the potential to ultimately hamper the effective amalgamation of renewable energy into India’s energy mix. Revisiting procurement frameworks will be key to addressing emerging risks in the standalone BESS segment, the report says. This would include launching tariff floors that closely reflect cost, tightening criteria for eligibility and revisiting the auction framework to make sure tariffs remain in line with execution realities. In addition to this, a standardised payment security set up will be key to improving project bankability.

Simultaneously, indigenous manufacturing ecosystem and domestic supply chains will slowly develop, the report says. Other essential factors to support this transition and cut dependence on imports include introduction of the Approved List of Battery Manufacturers (ALBM), acceleration of cell manufacturing under the Production Linked Incentive (PLI) scheme and the National Critical Mineral Mission (NCMM).

In conclusion the report adds that India’s BESS sector is continuously moving from the tendering and pipeline stage to execution and on-ground project deployment stage. Near-term execution challenges could result in delays or cancellations for a portion of the allocated capacity. In the near term though, supply chains will remain dependent on lithium carbonate imports from China, with a gradual diversification of sourcing and a shift towards a more diverse technology mix taking place. Ultimately, the pace and scale of energy storage deployment will determine India’s trajectory and ability to achieve its 500-GW renewable energy target by 2030.