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Unlocking Value from Battery Energy Storage Systems

March 25, 2026. By News Bureau

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Rajrajeswari Mishra

SBI Capital Markets Limited

National Electricity Plan

Non-fossil fuel sources

Renewable energy

BESS Requirement

FDRE Projects

India announced Panchamrit Goals in 2021 setting an ambitious goal for energy transition by 2030 and Net Zero by 2070 to meet Paris Agreement on Climate Change.

Currently, India’s energy consumption is very low -electricity consumption is at one third of the world average. However, the same is projected to grow substantially driven by economic growth and industrialisation. The 20th Electric Power Survey (EPS) projected a peak demand of 277.2 GW and an energy requirement of 1907.8 BU for 2026-27, rising to 366.4 GW and 2473.8 BU by 2031-32, factoring in electric vehicles, solar rooftops, and Green Hydrogen.

As of September 2025, total installed power capacity crossed 500 GW, with Non-fossil fuel sources (renewable energy (RE), hydro, and nuclear) contributing to 256.09 GW – over 51 percent of the total. Within renewables, Solar and wind power constituted 127.33 GW and 53.12 GW, respectively.

Further, on July 29, 2025, India reached its highest-ever renewable energy share in electricity generation. That day, renewables met 51.5 percent of the country’s total electricity demand of 203 GW. Within renewable generation Solar, wind and hydro generation were at 44.50 GW, 29.89 GW and 30.29 GW, respectively. This means that, for the first time, more than half of India’s power came from green sources in a single day — a remarkable sign of change.

For a balanced growth in India’s Energy basket, it is imperative to have a mix of baseload as well as intermittent/ peaking power installed capacity. This will also enhance India’s energy security, both from geopolitical as well as forex perspective. Considering the rich RE resources present in India (solar, wind, hydro), it is technically and financially advantageous to go for hybrid systems with RE and BESS combined.

Challenges in scaling up RE

The rising share of renewable is leading to grid instability and power curtailment due to intermittency and mismatch in the time of generation and demand, given the existing transmission and distribution network.

Demand forecasting errors, limited grid flexibility and constraints in transmission capacity are limiting the growth of RE. Further, rising RE power in the grid is deepening the duck curve requiring steep ramping up and down of the conventional resources.

On one hand, due to transmission congestion and grid security, significant amounts of renewable energy (10 percent-30 percent in some regions) is curtailed or not taken by the grid. On the other, the evacuation infrastructure connected from green energy zones is not fully utilised as RE power generation is limited to certain hours only-more so in case of solar.

BESS Value Proposition

BESS provides a holistic solution to all these problems. Coupling RE with BESS allows the supply of variable RE power on demand -solving the problem of both intermittency and scheduling.

Adding BESS capacity in the power system, strategically at various points would help to reduce RE curtailment as well as optimise the transmission infrastructure. The utilisation of the transmission system can be improved by putting BESS at the generation node which would store the power when the transmission capacity is not available and release when its available and demand is present. This will help in optimisation of new transmission capex being planned and waiting time for new RE projects to evacuate the power-thus reducing the transmission constraints.

BESS Requirement

As per projections in the National Electricity Plan (NEP), India is expected to require 16.13 GW / 82.37 GWh of energy storage capacity by FY 2026–27, comprising 7.45 GW (47.65 GWh) from Pumped Storage Projects (PSP) and 8.68 GW (34.72 GWh) from Battery Energy Storage Systems (BESS).

The requirement is projected to increase significantly with higher renewable penetration. By FY 2031–32, India’s energy storage requirement is estimated to reach 73.93 GW with 411.4 GWh of storage capacity, including 26.69 GW (175.18 GWh) from PSP and 47.24 GW (236.22 GWh) from BESS. While PSP projects typically have a 4-5 year gestation period (more suited for long term future plans), BESS projects can come up in 12-18 months, thus meeting the country’s immediate storage requirement.

Capacity and Pipeline

As of December 31, 2025, a total of 224 GWh of energy storage capacity had been tendered in India, including 92 GWh of Battery Energy Storage Systems (BESS) and 132 GWh of pumped hydro storage. Of this, 95 GWh is under various stages of execution, 80 GWh remains under tender, and 47 GWh of tenders have been cancelled. As of February 2026, BESS capacity of 0.8 GWh is operational, with ~6 GWh worth capacity expected to come online by December 2026. BESS projects are increasingly in two buckets – first, as a part of a renewable energy project (RTC/ FDRE) or, the second, as standalone storage project being a service provider.

Capital Cost

Price of lithium-ion batteries has fallen drastically leading to reduction in the cost of overall BESS projects. Ember estimates the all-in capex for a utility-scale, four-hour BESS project at around USD 125/kWh in markets outside China and the United States, including about USD 75/kWh for core equipment and USD 50/kWh for installation and integration.

The tariffs, discovered from FDRE and coal-based thermal power tenders, show that the cost of solar-plus-battery storage has reached parity with conventional power generation.

Funding Opportunity

Based on India’s projected 236.22 GWh BESS requirement, the total investment requirement is estimated at around ₹2.65 lakh crore (assuming USD 125,000 per MWh), with debt financing of approximately ₹1.85 lakh crore under a 70:30 debt–equity structure. For projects already tendered, the investment requirement is estimated at around ₹1.38 lakh crore, excluding the 47 GWh of cancelled tenders.

Revenue Models in India

BESS systems are best suited for short duration storage application (peak shifting) and providing ancillary services like voltage and frequency management. Battery systems in India are currently being deployed both in combination with solar and wind generation as well as on standalone basis. Prevailing revenue models can be clubbed under the flowing three buckets:

RTC/ Peaking/ FDRE Projects: Battery in combination with RE generation
a. Standalone Battery Storage Projects (BaaS): Entering into a long term BESPA, providing battery storage capacity for a fixed monthly charge (irrespective of actual usage)

b. Merchant/ Arbitrage based BESS project: Expected to be used as a time shifting/ peak shifting tool by RE gencos in order to improve their tariff realisations (which are depressed as present due to excess solar energy availability and less demand during daytime hours) which helps to flatten the duck curve.

The RE projects under open access models are expected to start adding batteries to provide firm RE/round the clock power to CCI consumers going forward.

While the merchant model offers potential upside from market-based revenues, it also carries higher revenue uncertainty. In contrast, the BaaS model provides greater revenue visibility through contracted payments for capacity or grid support services, making it more viable for traditional project financing in the current market. However, the merchant model could be considered as an upcoming sector of interest.

Key considerations in BESS financing include battery life, warranty structures, performance guarantees, and the robustness of degradation assumptions over the project life. Key risks include dependence on Chinese suppliers for core battery components, uncertainties around long-term degradation profiles, and evolving technology standards that may impact long-term performance and replacement requirements.

Conclusion

As the new generation tenders has slowed down due to rising backlog of unsigned PSAs and transmission constraints BESS systems provide the missing piece in the growth journey of RE going forward.

- Rajrajeswari Mishra (SVP), SBI Capital Markets Limited.

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