India’s power sector is at a measurable turning point. This is not a narrative shift driven by sentiment or ideology. It is being driven by numbers. Battery prices, tender tariffs, DISCOM balance sheets, and cancellation statistics all point in the same direction. Storage has moved from being a niche add on to becoming the lowest cost solution for meeting peak demand. At the same time, the way India is procuring storage is beginning to show stress signals that cannot be ignored.
The System Level Need for BESS in India
- India’s electricity demand profile is increasingly asymmetric. Solar generation peaks between 11 am and 3 pm. Demand peaks between 6 pm and 12 am. This gap has widened as solar capacity has scaled.
- In high renewable states, daytime solar curtailment has become routine, while thermal generation continues to set marginal prices during evening hours. The system problem is therefore not energy availability but energy timing.
- Battery energy storage directly addresses this issue by shifting surplus daytime solar into evening peak periods. From a system planning perspective, even four hour storage significantly reduces peak thermal dispatch.
Scale of India’s Storage Requirement
- The scale required is substantial and quantifiable. Since 2021, India has tendered approximately 83 GWh of grid scale battery storage capacity. Of this, around 36 GWh has been awarded. About 18 GWh is under construction. Nearly 8 GWh has already been cancelled. Roughly 15 GWh remains under active tendering.
- By contrast, multiple studies estimate that India will require approximately 230 to 240 GWh of storage by 2032 to support renewable integration and peak demand management. This means less than 20 percent of the required capacity is either operational or under construction today.
- The gap between requirement and execution highlights both urgency and fragility.
Battery Cost Decline and the Tariff Reset
- The single most important variable has been battery cost.
- Battery pack prices are varying drastically, considering the geopolitical scenario and rare earth minerals dependencies on other countries. Solar plus battery projects that were marginal at INR 4.5 to 5/kWh are now viable closer to INR 3.4/kWh
Comparative Tariffs Tell the Story
- The divergence is visible in tariff outcomes.
- Standalone solar tariffs between 2023 and 2024 consistently ranged between INR 2.3 and INR 2.7 /kWh. Solar plus battery tenders discovered tariffs as low as INR 3.41/kWh by late 2024.
- FDRE tenders showed significantly higher prices. An FDRE tender in late 2023 discovered INR 4.38/kWh. Subsequent load following FDRE tenders in 2024 ranged from INR 4.98 to INR 5.60/kWh depending on demand fulfillment requirements.
Undersubscription and Cancellation of Tenders
- Tender response data confirms this price mismatch.
- In 2024, around 8.5 GW of utility scale renewable tenders were undersubscribed. This was nearly five times higher than in 2023. Energy storage linked tenders, predominantly FDRE, accounted for about 44 percent of this undersubscribed capacity.
- Cancellation data is more concerning. Between 2020 and 2024, lot of utility scale renewable capacity was cancelled.
- In 2023 alone, energy storage based renewable tenders accounted for roughly two thirds of all cancelled capacity. This level of rejection indicates a structural problem rather than temporary market hesitation.
DISCOM Economics Explain the Behaviour
- The response of utilities is rooted in financial reality.
- As of March 2024, state distribution companies had accumulated losses of approximately INR 6.92 trillion. Outstanding debt crossed INR 7.5 trillion after growing by about 12 percent in a single year.
- Under these conditions, utilities are extremely sensitive to tariff levels and contract rigidity. Long term power sale agreements at INR 5/kWh with strict performance obligations represent a material financial risk.
- This explains why cumulative unsigned power sale agreement capacity has exceeded 40 GW, with a significant portion linked to central agency tenders.
The Shift Toward Modular Solar Plus BESS
- Solar plus battery procurement changes the risk profile.
- Utilities can procure low cost solar energy separately and add battery capacity specifically for evening peak hours. Instead of paying a fixed firm tariff across all hours, they pay for storage only where it delivers value.
- For example, a four hour battery supporting evening demand from 6 pm to 10 pm directly displaces peak thermal generation. This aligns better with DISCOM cost structures and operational priorities.
Record Low Battery Bids and the Emerging Risk
- While battery costs have fallen, recent bids are pushing the limits of sustainability.
- Some storage tenders have discovered tariffs below INR 1.5 /kWh. Standalone battery capacity tenders with viability gap funding have reached levels of INR 2.36 to 2.38 lakh per MW per month.
- At these tariffs, concerns arise regarding realistic assumptions on cell life, degradation, replacement schedules, safety systems, and long term operations.
- There is also increasing concern that some bidders may be securing awards without firm intent or capability to execute projects. If such projects fail at later stages, lenders and utilities bear the consequences.
Battery storage is now the lowest cost option for managing India’s evening peak when paired with solar. India’s storage transition is inevitable. Whether it is smooth or disorderly will depend on how quickly procurement frameworks adapt to what the numbers are already saying.
