Role of Battery Energy Storage Systems: Fuelling India’s Clean Energy Sprint

Role of Battery Energy Storage Systems: Fuelling India’s Clean Energy Sprint

BESS is fast emerging as a critical driving force as India strides towards its target of installing 500 GW of energy from renewable sources by 2030.

One of the most striking announcements that came out of the Union Budget 2026-2027 is the nine-fold increase in the viability gap funding (VGF) for battery energy storage systems (BESS) accompanied by the basic customs duty (BCD) exemptions for capital goods used for manufacturing lithium-ion cells for BESS. This potently underlines India’s resolve to strengthen and scale the energy storage sector, posited as an inflection point in India’s energy transition roadmap.

BESS is fast emerging as a critical driving force as India strides towards its target of installing 500 GW of energy from renewable sources by 2030. As per estimates by the Central Electricity Authority (CEA), this transition will require approximately 236.2 GWh from BESS by 2030-32 implying the mammoth growth in demand and production that the BESS sector is likely to record in the upcoming years. Although there’s abundance of renewable energy available in India, its intermittent nature makes sustainable storage solutions exigent to achieve power grid stability, integration of renewables in the existing energy infrastructure and long-term energy security.

Battery Energy Storage System: An Infrastructural Overview

BESS are essentially batteries comprising electrochemical components which can get charged from an existing electricity source or from renewable sources like solar, wind or hydro power and an integrated system built around batteries which can either operate independently or be connected to a power grid. Applications of BESS in our everyday lives have increasingly proliferated across different walks of life. Be it electric vehicle charging points dotting almost every corner of our cities or the ubiquitous uninterrupted power supply (UPS)/ inverters enabling power back ups to almost every building during outages, BESS as a reliable and sustained power source has already made its mark.

The government is now levying special focus on boosting BESS generation, procurement and deployment to build grid resilience through various regulatory schemes and policies, with the overall aim of propelling India’s clean energy goals through a steady energy storage infrastructure.

Building BESS capacity through robust regulations

With the vision to promote BESS projects in India as a key clutch to meet India’s energy goals, the government has enacted several schemes and guidelines:

1. The Electricity Act, 2003 and Rules, 2022

The Act defines “power system” under Section 2(50), while the 2022 Rules explicitly includes Energy Storage Systems (ESS), such as BESS. These systems can be standalone or integrated with generation/grid assets. The Rules delicense independent storage, requiring only CERC registration, and permit owners to sell or lease storage space to utilities.

2. CERC (Ancillary Services) Regulations, 2022

These recognize ESS for providing secondary and tertiary ancillary services (e.g., fast frequency and active power support). This improves grid stability, relieves congestion, and enhances bankability by generating additional revenue and mitigating market costs.

3. Guidelines for BESS Procurement and Utilisation, 2022

Framed by the Ministry of Power, these guidelines promote BESS deployment to reduce grid variability. They establish a transparent, competitive bidding framework and expand the legal definition of BESS to allow market participation. They also streamline compliance regarding battery waste management.

4. National Framework for Promoting Energy Storage, 2023

This framework fosters an ecosystem for energy transition and security. It sets technical standards for interoperability and sustainability. Key features include Energy Storage Obligations (ESO) for distributors, Performance Linked Incentives schemes, and the inclusion of ESS in the Harmonized Master List of Infrastructure.

5. Waiver of Interstate Transmission Charges (ISTC)

To facilitate affordable transmission, the Ministry of Power exempted renewable energy-generated electricity, including BESS, from Inter State Transmission Charges if commissioned by June 30, 2025, now extended to June 30 2028. Co-located projects recently received a three-year extension, while the original deadline remains for standalone projects.

6. Viability Gap Funding (VGF)

This financial scheme covers up to 40% of BESS capital costs to improve developer viability. Funding is released in five instalments (10% at financial closure, 45% at commissioning, 45% over three years). Outlays include `9,400 crore for 4,000 MWh and `54 billion for an additional 30 GWh. There is an additional `1000 crore allocation of budget from the recent union budget for BESS projects.

7. PLI Scheme for ACC Battery Storage, 2021

With a `18,100 crore outlay, this scheme targets 50 GWh of domestic manufacturing. It includes a two-year gestation period and requires manufacturers to achieve 25% domestic value addition, rising to 60% within five years.

Contours of current enforcement and development: Tenders and More

Since 2022, there has been a marked increase in BESS auctioning with about 12.8 GWh of BESS projects already auctioned till mid-2025. The VGF announcements, the fall in lithium-ion battery prices have contributed to strengthening the BESS market in India, setting in motion tender releases, market driven offtakes and public sector investments in BESS. Even the bidding process in the recent context has been streamlined leveraging the e-bidding format on the Central Procurement Platform (CPP) to ensure efficiency and transparency.

The biggest thrust in the successful BESS tenders in the recent times has come from the actualisation of the Battery Energy Storage Purchase Agreement (BESPA) by SECI. Based on the provisions of the Guidelines for Procurement and Utilisation of Battery Energy Storage Systems, 2022 BESPAs have been critical in rendering policy directives of the Guidelines into enforceable agreements which in turn has laid down the foundation for risk-averse standardised blueprints for BESS projects.

Shortcomings in the way

BESS deployment and development is expanding at a phenomenal pace in India. In the first quarter of 2025 alone, BESS tenders stand at the capacity of 54 GWh. However, despite the concerted efforts to amplify the BESS infrastructure in India, the growth is to some extent beset by implementational as well as regulatory challenges.

BESS currently is not legally defined and is retrofitted to the definition of ‘power system’ under the Electricity Act and that too as a subset of larger ESS. While this accords some flexibility in defining ESS and by extension BESS as a generator or transmitter, this causes overlaps in offtakes and stirs competitiveness among other ESS like pumped hydro energy storages or phase change energy storages. This also limits BESS’ scope of application. As primarily an energy storage source, supplying on-demand energy, BESS faces certain limitations in its adaptation as a full stack energy resource including distribution and transmission, thus inhibiting additional revenue streams that BESS can unlock. However, there are ongoing pilots and proposals to leverage BESS as a independent, full stack energy asset.

Parallelly, the plummeting price of battery is creating a conundrum regarding price competitiveness. This in turn is resulting in delay in signing of power purchase agreements (PPA) as well as underbidding.

While the 2023 Framework establishes energy storage obligations (ESO), the State governments have variable Energy Storage Obligations. This may potentially dissuade BESS developers from inter-state development, which otherwise could have been a succour to larger capital cost levelling.

In spite of these roadblocks, BESS’ growth prospect in the contemporary context is undeniable. By implementing standardized, performance-driven procurement and rigorous, measurable compliance, BESS can bring amplified value to India’s power grid. Executed effectively, BESS can facilitate the foundational infrastructure that transforms renewable energy from an intermittent resource into a dependable powerhouse available whenever the nation requires it most and also become a reliable and sustainable solution for clean energy distribution.

Disclaimer – The views expressed in this article are the personal views of the author and are purely informative in nature.