India’s energy storage auctions face risk as tariffs undercut costs

Nearly 75% of standalone battery capacity sits in the risk category.

India’s standalone battery energy storage system (BESS) tariffs have dropped below estimated viable cost levels, creating a gap that raises concerns over financing and potential project delivery delays.

A joint report from JMK Research and Analytics and the Institute for Energy Economics and Financial Analysis (IEEFA) shows that the lowest discovered tariff for two-hour standalone BESS projects in 2025 reached $1,576.00/MW/month.

This compares with an indicative benchmark of $2,448.95/MW/month, placing a large share of awarded capacity in a risk category.

The report finds that nearly 75% of allocated two-hour BESS capacity in 2025 sits in a risk category due to the difference between bid tariffs and estimated project costs.

It adds that viable outcomes have so far been concentrated in smaller, early-stage state auctions in Karnataka, Tamil Nadu, Telangana, and Gujarat.

The country allocated 10.4 gigawatts (GW) of standalone BESS capacity in 2025, with two-hour, two-cycle systems forming the dominant configuration, which allow charging and discharging twice daily to serve morning and evening demand peaks.

“Since mid-2025, though, the 4-hour segment has been increasingly gaining prominence, as its higher single-cycle energy throughput is well suited to meet evening peak demand requirements,” said Mouli Srivastava, Research Associate at JMK Research and Analytics.

The report states that execution risks could delay implementation of allocated capacity by up to 18 months, linking these risks to challenges in financial closure, procurement processes, and commissioning.

It also highlights the potential for cost pressure at lower tariffs to affect asset quality.

India’s cumulative tendered energy storage capacity has increased to 90.7 GW in 2025 from 6.8 GW in 2018.

Standalone storage accounts for more than 71% of total capacity tendered in 2025, with standalone BESS making up 60% of that share.

The report attributes the growth in standalone storage tenders to falling battery prices and policy support, including viability gap funding for standalone BESS projects.

Prabhakar Sharma, Senior Consultant at JMK Research and Analytics, adds that around 1.8 gigawatt-hour of grid-scale BESS capacity had been installed by March 2026, with most of the capacity added in the final six months of FY 2026.

The report also notes reliance on lithium-ion technology exposes the sector to supply chain risks.

Charith Konda, Energy Specialist, India Mobility and New Energy at IEEFA – South Asia, states that tendering agencies are expected to consider alternative technologies.

This includes flow batteries and sodium-ion systems, which offer different characteristics in lifespan, safety, and cost structure.