India’s battery storage rush faces execution stress as 75% projects fall below viability levels

The findings come as India sharply accelerates battery storage deployment to support its renewable energy expansion and rising evening peak demand.

According to a new report by JMK Research and the Institute for Energy Economics and Financial Analysis (IEEFA), standalone Battery Energy Storage System (BESS) tariffs fell to as low as ₹1.48 lakh per MW per month for two-hour systems in 2025, significantly below the benchmark viability tariff of ₹2.3 lakh per MW per month.

“Nearly 75% of allocated 2-hour BESS capacity falls into the at-risk viability category, indicating a major gap between discovered tariffs and actual project costs,” the report titled Viability of standalone battery energy storage tariffs discovered in 2025 said.

India allocated around 10.4 GW of standalone BESS capacity in 2025, while cumulative energy storage tendered capacity surged more than 13 times from 6.8 GW in 2018 to 90.7 GW by 2025. Standalone storage tenders accounted for over 71% of total storage capacity tendered during the year, with standalone BESS projects making up around 60% of this capacity.

The report said the rapid fall in tariffs was increasingly diverging from actual project costs and execution realities.

Between 2022 and 2025, average standalone BESS tariffs declined by nearly 79.6%, while battery pack prices fell only 36.5% during the same period, exposing developers to rising cost pressures and weak project returns.

“Tariff reduction accelerated sharply in the second half of 2025,” the report said, adding that several large-scale tenders were awarded at “very low prices, suggesting speculative bidding behaviour”.

The stress is beginning to spill into financing and project execution. The report said implementation delays ranging from nine to 18 months could continue because of challenges related to financial closure, procurement and commissioning.

“Execution risks can constrain BESS project realisation. Financing conditions remain stringent, while declining tariffs, rising battery input costs, and heavy reliance on China across key segments of battery supply chain are expected to create execution challenges,” the report noted.

Financial institutions are also tightening lending standards for battery storage projects. According to the report, lenders are typically seeking internal rates of return (IRRs) in the range of 15-20% because of high input-cost volatility and lack of historical operational precedent in the sector.

The report also flagged rising risks around asset quality and long-term system reliability as developers attempt to protect margins under ultra-low tariff structures.

“Cost pressures at lower tariffs could also lead to compromised asset quality,” it said.

Battery remains the single largest cost component in storage projects, accounting for nearly 60% of total BESS capex, while India continues to remain heavily dependent on imported lithium-ion cells from China.

The report noted that lithium carbonate prices in China nearly doubled by December 2025, while China’s phased withdrawal of battery export rebates from April 2026 was expected to further increase landed battery costs in India.

Execution capability has emerged as another weak link in the sector’s rapid expansion. Only 46.3% of the allocated 10.39 GW capacity was awarded to developers considered to have high standalone BESS execution readiness, while the remaining projects went to firms with limited or no prior battery storage deployment experience.

“Although the near-term challenges may lead to some project cancellations or delays, the eventual growth of ESS is inevitable,” said Prabhakar Sharma, Senior Consultant at JMK Research and co-author of the report.

The report said reforms such as cost-reflective tariff floors, stricter eligibility criteria, standardised payment security mechanisms and accelerated domestic battery manufacturing would be critical to support large-scale storage deployment and renewable energy integration in the coming years.