India’s renewable energy sector is set for a significant surge in battery energy storage system (BESS) deployment, with 45-50 gigawatt-hour (GWh) of capacity expected to be commissioned over the current and next financial year, compared with just 1 GWh as of last fiscal, according to Crisil.
The ratings agency said the growth is attributed to a strong pipeline of projects under implementation and continued policy support. Capacity additions could have been even higher, but 8-9 GWh of awarded capacity faces a higher risk of delay, moderating the overall deployment outlook.
The analysis covers bids awarded between FY24 and FY26 across 100 renewable energy developers. Crisil said the growing need for storage is a consequence of the rising share of renewable energy (RE) to 39 per cent of India’s installed power generation capacity and 15 per cent of energy generated last fiscal.
As RE generation is intermittent, it has increased the need for firm and peak-hour power supply. This has elevated the importance of energy storage solutions, particularly BESS. The requirement is especially acute for solar projects because electricity demand peaks in the evening, when solar generation is negligible and BESS can address this mismatch.
In line with its objective of integrating a larger share of RE into the national power grid in a sustainable manner, the government has accelerated storage-linked auctions. Projects incorporating BESS accounted for nearly 40 per cent of total auctioned capacity in FY26, up sharply from about 5 per cent in FY24 and FY25.
“As a result, 50-55 GWh of BESS capacity is scheduled for commissioning across FY27 and FY28. Of this, around 40 GWh has been awarded through government-led auctions, where distribution utilities are the offtakers, while the remaining 10-15 GWh is expected to serve commercial and industrial consumers directly or be deployed in the merchant market,” Crisil said.
However, 21 per cent of the under-construction BESS capacity, equivalent to about 12 GWh, faces weak return potential, which may lead to some delays in commissioning. The risk has emerged because battery prices have hardened in 2026, while tariffs bid out for these projects were relatively low.
“Developers typically procure batteries about a year after securing project bids. Consequently, most projects awarded in 2025 are now exposed to higher battery prices, which have rebounded from the lows witnessed in 2025. As battery prices were consistently coming down till 2025, developers appeared to have bid aggressively on the assumption that prices would continue their downward trajectory,” said Manish Gupta, senior director and deputy chief ratings officer at Crisil.
However, in reality, battery prices have increased and, at these prevailing levels, project returns may be insufficient to achieve a typical target internal rate of return of 12-14 per cent, according to Crisil. Consequently, developers may defer implementation in anticipation of more favourable battery pricing.
Further, around 8-9 GWh out of this 12 GWh of planned capacity is exposed to an additional challenge: limited implementation experience among project sponsors. While BESS projects typically face relatively lower land acquisition and connectivity-related challenges compared to conventional renewable energy projects, equipment procurement remains a key risk given the sector’s continued dependence on overseas suppliers for batteries and other critical components.
