Why lower standalone battery storage tariffs pose viability risk

India’s clean energy transition is increasingly becoming dependent on large-scale storage deployment, but tariff viability remains a concern for the 2025 standalone BESS bids.

Tariffs fell sharply, with the lowest discovered tariff in the year reaching Rs 1.48 lakh/megawatt/month for 2-hour systems, against an indicative benchmark tariff of Rs 2.3 lakh/MW/month for 2025, according to a new report by the JMK Research and Analytics and Institute for Energy Economics and Financial Analysis (IEEFA).

Nearly 75% of the allocated 2-hour capacity now sits in the at-risk category, indicating a significant gap between discovered tariffs and actual project costs. Viable outcomes have largely been confined to early-stage, smaller-scale procurements through five state-led standalone BESS auctions in Karnataka, Tamil Nadu, Telangana, and Gujarat.

What is the status?

India’s cumulative tendered energy storage capacity has surged from 6.8 GW in 2018 to 90.7 GW in 2025. Standalone energy storage system (ESS) tenders, which contract storage capacity without being tied to a specific renewable generation asset, have emerged as the dominant segment.

ESS accounts for more than 71% of total capacity tendered in 2025, with standalone battery energy storage system (BESS) projects making up 60% of this.

“The surge in standalone storage tenders has coincided with declining battery prices and supportive policy measures such as the introduction and expansion of viability gap funding for standalone BESS projects,” says Vasu Mor, Research Associate at JMK Research and Analytics, and co-author of report titled ‘Viability of standalone battery energy storage tariffs discovered in 2025’.

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The report examines tariff outcomes observed in standalone BESS tenders in India, and examines the factors influencing tariff discovery, while evaluating economic viability under current market conditions, and mapping the near-term outlook for standalone energy storage deployment.

Among the 10.4GW of standalone BESS capacity allocated in 2025, the 2-hour, 2-cycle configuration dominated. This type of tender configuration empowers energy off-takers to address both morning and evening peak demand windows within a single day.

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Why are the challenges?

The report also evaluates the factors influencing the execution of allocated BESS capacity, focusing on battery cost trends, developer capabilities, and financing conditions. Execution risks in standalone BESS are expected to have broader implications for the sector.

Implementation delays of up to 18 months may persist due to challenges related to financial closure, procurement and commissioning. Cost pressures at lower tariffs could also lead to compromised asset quality.

“Although the near-term challenges may lead to some project cancellations or delays, the eventual growth of ESS is inevitable. This momentum is already visible, with the majority of the around 1.8 gigawatt-hour (GWh) of grid scale BESS capacity installed as of March 2026 having come online in the last six months of FY2026. Meanwhile, the aggressive bidding observed in 2025 is expected to gradually normalise as market participants recalibrate to execution realities,” says Prabhakar Sharma, Senior Consultant at JMK Research and Analytics, and a co-author of this report.

Overwhelming reliance on lithium-ion (Li-ion) technology has also exposed the Indian energy storage sector to global supply chain shocks, the report shows. Tendering agencies are likely to start focusing on alternative battery technologies with longer lifespans, higher salvage value, and lower exposure to supply-chain risks.

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