Solid Power Purchase Agreements and flexible technologies are expected to mitigate obsolescence risks and drive project-level investments.
India’s Battery Energy Storage System ecosystem is poised for significant growth, with estimated funding opportunities reaching ₹3.5 lakh crore and an additional ₹80,000 crore in medium-term investments, primarily focused on cell manufacturing.
India’s Battery Energy Storage System (BESS) ecosystem is on the cusp of unprecedented growth, with a funding opportunity estimated at ₹3.5 lakh crore by FY2032. This growth is expected to be accelerated in the medium term by an additional ₹80,000 crore in investments, largely driven by capital expenditures in cell manufacturing, according to a report by SBI Capital Markets.
This massive opportunity spans both project-level and upstream investments, supported by solid Power Purchase Agreements (PPA) and Power Sale Agreements (PSA) with credible DISCOMs, and tailored project models and cell technologies.
Obsolescence risks in BESS—like falling battery prices and a shift to higher-capacity batteries—are mitigated by competitive tariffs, DISCOMs’ current Energy Storage Obligation (ESO) and Renewable Purchase Obligation (RPO) targets, and PPA-aligned project lifespans.
Battery manufacturing surge and M&A opportunities
Battery manufacturing will drive significant capital expenditure as both established and emerging players scale up. Technological advancements in this sector are also fueling a rise in mergers and acquisitions, presenting lucrative opportunities for companies looking to expand.
The transition toward a Variable Renewable Energy (VRE) future is expected to triple VRE’s generation share by FY32. Storage capacity is projected to grow 12-fold, reaching 60 GW by FY32, with the share of RE tenders incorporating storage rising from 5% in FY20 to 23% in FY24.
BESS and PSP as complementary technologies
BESS and Pumped Storage Projects (PSP) are emerging as the primary energy storage solutions, together expected to capture nearly 100% of the market. BESS will dominate with its flexibility, efficiency, and rapid response times, while PSP will serve as a complementary solution for peak shaving. Despite PSP’s longer gestation periods and associated challenges, its low operating costs, absence of e-waste, and grid-stabilizing abilities make it valuable. BESS capacity is projected to reach 47 GW by FY32, with PSP increasing fourfold to 19 GW.
“Although current energy storage capacities are relatively modest, the sector is set for rapid growth over the next decade, with BESS emerging as the dominant technology and PSPs playing a complementary role. A key factor in this expansion will be indigenization and a cradle-to-grave approach to the battery ecosystem, with the government’s PLI schemes marking a crucial first step.
This will help further reduce tariffs, which are already at competitive levels, while promoting energy security. Together, these efforts could unlock an investment opportunity of over ₹5 trillion in this emerging sector, according to analysts at SBI Capital Markets.
Reducing BESS tariffs depends on domestic battery cell manufacturing and a robust component supply chain. Currently, 80% of BESS costs stem from batteries and components, with most cell manufacturing concentrated in China.
Recognizing this, the government’s PLI for Advanced Cell Chemistry aims to build 55 GWh of new capacity, with key players already announcing nearly 120 GWh, just enough to meet demand over the next few years. To meet this demand, further expansions in capacity and a thriving component ecosystem—covering cathodes, anodes, electrolytes, and separators—are anticipated.
Supportive policies, such as waived ISTS transmission charges and stringent ESO/RPO requirements, are expected to drive demand across the BESS value chain. This growth will bolster BESS project development, cell manufacturing, and component production, setting the stage for robust sector expansion in the coming decade.