India's battery energy storage push hits a viability wall

India's green energy transition is facing headwinds as efforts to support wind and solar power with battery storage falter, driven by aggressive bidding, project unviability, and widespread contract cancellations. Industry experts believe as much as one-third of the projects bid out so far could be unviable.

Battery energy storage systems (BESS) store solar and wind energy when it is produced for use later. To make variable renewable energy more reliable, the government has mandated BESS integration for all future solar and wind tenders.

However, data from the India Energy Storage Alliance (IESA), an industry body of battery makers, shows a total of 24 gigawatt hour (GWh) BESS projects were cancelled or re-tendered during 2018-2026, highlighting the challenges in transitioning to green power. The year-wise breakup of project scrapping or re-tendering was not available.

The number of cancelled or retendered capacity comprises over 11% of the Central Electricity Authority's (CEA) target of 208 GWh by the end of this decade.

Another 22 GWh capacity awarded under the government's ₹5,400 crore viability gap funding (VGF) 2.0 plan is also under strain as BESS developers had got these contracts by bidding at unviable rates of below ₹2 per kilowatthour (KWh), said three people in the know. As per current trends, BESS tariff must be at least ₹2.4 per unit to be seen viable.

Under the VGF scheme, the government provides budgetary support of up to ₹18 lakh per MWh for setting up battery storage of up to 30 GW. Per power ministry data given in the Rajya Sabha in July, of the 30 GWh, letter of award has been issued for 22.43 GWh, of which financial closure was achieved for only 5 GWh.

Alok Kumar, director general of the All India Discoms Association (AIDA), an industry body of power distribution companies, said concerns persist over the viability of about one-third of the projects bid out so far.

“Companies are still figuring out the technology. It is estimated that around 30%, or up to one-third of the projects, may not be viable as developers are yet to complete financial closure,” said Kumar, a former secretary in the ministry of power. “This is a learning stage, but norms should be put in place to select efficient and capable players, rather than focusing on the lowest tariff quoted.”

Last month, state-run NTPC Ltd terminated the ₹413-crore contract awarded to Gurugram-based GR Infraprojects Ltd (GRIL) for a 400-MWh BESS project at the Mouda Super Thermal Power Station in Maharashtra due to the contractor's failure to meet its contractual obligations and achieve the required project progress.

"There is concern over the viability of several projects. Initially, several frivolous players came up and placed very low bids in order to win tenders. NTPC has cancelled a contract and also revoked the bank guarantee," said an NTPC official on the condition of anonymity.

In a statement on 19 September, NTPC said the project, awarded in March 2026, was scheduled for completion within 15 months. “A contractual notice was issued to GRIL calling for immediate corrective action, but GRIL failed to undertake the required remedial measures,” it said, terminating the contract and encashing securities of about ₹91 crore.

The sector had seen huge interest in recent years amid expectations of exuberant growth amid low-cost battery imports from China.

"Many newcomers in India jumped into BESS projects, submitted bids for projects aggressively, with the expectation that the battery price trajectory will continue to decline. But owing to policy changes in China last year, battery cell prices increased by 32% during January-July 2026, making many projects unviable," said Reji Kumar Pillai, president of the India Smart Grid Forum, a power ministry-backed think tank.

Pillai said the BESS industry globally is at a very nascent stage and none of the large megawatt hour-scale projects have crosses 10 years and all the gigawatt hour-scale projects were commissioned less than five years ago.

Vikash Venkataramana, chief product officer, of Amara Raja Advanced Cell Technologies, a battery manufacturer told Mint that the prospect of more cancellations was “a major concern” for the energy storage industry as it “threatens to derail both national clean energy targets and broader market confidence”.

"A pattern of frequent cancellations creates regulatory uncertainty, which deters major foreign and local institutional investors. This makes financing more expensive and fragile for remaining developers," Venkataramana said.

He added that cancellation of tender awards could be a concern because it exposes a major gap between aggressive bidding and real-world project viability. “Because India relies heavily on China for battery technology, local projects are uniquely vulnerable to volatile Chinese raw material costs and shifting export markets. This early wave of aggressive pricing largely stemmed from a poor understanding of global supply chain dependencies,” Venkataraman said. “Ultimately, these drastically low prices raise serious concerns over substandard equipment, particularly because the strict technical qualification frameworks needed to guarantee long-term asset safety and performance are still not in place in India.”

In May, the West Bengal State Electricity Distribution Co. Ltd (WBSEDCL) had annulled the tender for a 250 MW/1000 MWh standalone BESS at Goaltore and withdrew the letter of award issued to PM Green Pvt. Ltd, a wholly-owned subsidiary of Power Mech Projects Ltd.

In an exchange filing, Power Mech attributed the action to administrative and procedural exigencies “arising from circumstances beyond the control of either party” and that it was "not on account of any default or non-compliance".

And then in June, the Appellate Tribunal for Electricity (Aptel) set aside Maharashtra Electricity Regulatory Commission's (MERC) nod to Maharashtra State Electricity Distribution Co. Ltd (MSEDCL) tender for procurement of 2,000 MW/4,000 MWh of BESS capacity, effectively cancelling one of India’s largest standalone battery storage tenders. The tribunal said MSEDCL introduced a new norm of 6,300 battery charge-discharge cycles after the bidding process concluded, whereas the original tender documents specified a lower operational requirement of 5,475 cycles, according to a report by JMK Research & Analytics.

Getting real

On the brighter side for the industry, the retendering process for a couple of projects that were cancelled has seen a rise in the tariffs quoted, indicating an industry-wide movement towards "realistic tariffs", said the people in the know.

Debmalya Sen, president of the IESA, said: “The reverse auction that is happening for the retendered capacity is seen to jump close to today's reality—first MSEDCL and now SJVN. A tender awarded at ₹1.97 per unit a few months back has discovered a tariff of ₹2.35 in just some months. We hope to see an upward correction in the tariffs, going ahead, which would make the projects sustainable and enable growth of the sector.”

Noting that the cancellation and re-tendering process delays the timeline for project implementation and thereby the transition deadlines, Mohit Bhargava, former chief executive officer of NTPC Green Energy Ltd and currently country director at India Energy & Climate Center, said: “People have been bidding with a thought process that Chinese prices will always be low. But no one can guarantee that, so adequate measures are required that the Indian market is not impacted. All due processes and penalties need to be imposed so that people bid more responsibly.”

An official with the ministry of new and renewable energy said tender provisions and contract terms, such as invoking of bank guarantees, are expected to be adequate to deter “irresponsible” bidders and ensure timely implementation.

Amara Raja's Venkataramana said policymakers should shift from chasing the "lowest possible tariff" toward building a bankable, resilient framework through well thought out policy.

As of September end, a total of 13.47 GWh BESS capacity has been installed in India while around 153GWh is in the pipeline at several stages of regulatory approval or construction process.

Queries emailed to the ministry of power and new and renewable energy, NTPC and SJVN remained unanswered until press time.