India’s battery energy storage sector reached a major milestone in 2024, with battery storage systems operating solely in power exchanges turning profitable for the first time, according to a report by Ember. This marks a turning point for energy storage investments, driven by falling costs and increasing market volatility.
At COP26, Prime Minister Narendra Modi set a target of 500 GW of non-fossil fuel capacity by 2030, a goal that, while not part of India’s formal NDCs, plays a key role in national energy planning, including the 14th National Electricity Plan (NEP-14). By June 2025, India had installed 168 GW of solar and wind capacity, with another 145 GW in the pipeline.
NEP-14 aims for solar and wind to account for over 50 percent of electricity generation by 2032, targeting 365 GW of solar and 122 GW of wind. To support this shift, India needs to integrate 74 GW / 411 GWh of energy storage — including 27 GW / 175 GWh of pumped storage and 47 GW / 236 GWh of battery energy storage systems (BESS) — by 2032.
As of June 2024, only 500 MWh of BESS was operational, but 121 GWh is in the development pipeline, with 62 GWh under execution and 59 GWh in the tendering phase. BESS can be integrated at multiple levels of the electricity system, offering operational flexibility by being co-located with generation, embedded in transmission and distribution networks, or used behind the meter, enabling support and services across the grid based on system needs.
Key Investment and Growth Highlights:
Profitability Triggered by Cost Decline: Battery costs have fallen by 80 percent since 2015. The 2024 levelised cost of a 2-hour storage system dropped to INR 1.7 million/MWh, while potential revenues from the Day Ahead Market surged to INR 2.4 million/MWh — a fivefold jump.
Strong Returns on Investment: Merchant BESS projects commissioned in 2024 are delivering internal rates of return (IRR) up to 24 percent. Even with conservative revenue assumptions and technical variability, IRRs range between 15.5 percent and 18 percent.
Attractive Arbitrage Opportunity: India’s power exchanges offer lucrative price arbitrage, with prices dipping to near-zero during solar hours and spiking above INR 9/kWh during evening peaks. BESS can now fully recover lifecycle costs purely through arbitrage.
Favorable Short-Duration Strategy: 1–2 hour battery systems show higher returns (15–22 percent IRR) than 4-hour systems (13–18 percent), due to their ability to cycle more frequently and capitalise on price swings.
Additional Revenue from Grid Services: Participation in ancillary services like the Secondary Reserve Ancillary Services (SRAS) market can generate INR 0.7 million/MWh/year in additional revenue, making merchant BESS even more financially compelling.
Market-Driven Momentum: Between 2022 and 2024, power prices hit the price cap in one of every six hours, signaling a growing need for grid flexibility. This volatility, along with reserve shortages, highlights the critical role BESS will play in supporting India’s renewable energy transition.
Strategic Outlook:
Battery energy storage is now emerging as a commercially viable and strategically essential component of India’s electricity market. With rising demand for grid flexibility and transparent price signals from wholesale markets, merchant BESS has become a bankable investment opportunity for energy developers, utilities, and institutional investors.
Baburajan Kizhakedath