Rising battery prices are putting pressure on the financial returns of India’s BESS projects. Around 8–9 GWh of awarded capacity faces a higher risk of delays, while nearly 12 GWh of under-construction capacity may deliver weaker returns at current battery costs.
Snapshot
Impact - higher delay risks.
Price - Around $ 70–70–75/kWh.
Returns - weak returns.
Target - Difficult to reach.
Price Link - BESS proportional to battery cost
India faces intense pressure in the battery energy storage sector as battery prices show an upward trend in 2026. This led to weak returns for many low-tariff projects. According to Crisil Ratings, around 8–9 GWh of awarded battery energy storage system (BESS) capacity could face a higher risk of delays as developers deal with.
The battery prices, raw material costs, stronger global demand, supply chain pressures, and currency movements are interlinked. Utility-scale lithium iron phosphate (LFP) battery systems are currently being quoted at around $70–75 per kWh. This is significantly different from the unusually low prices many developers had expected when bidding for projects.
The timing of battery purchases is also adding to the challenge. Developers generally purchase batteries about a year after securing a project. Those projects awarded in 2025 confront a higher financial burden, as the battery costs rise more than those assumed during the bidding stage. This mismatch between project tariffs and current equipment costs is putting pressure on project economics.
Crisil Ratings analysed projects awarded between FY24 and FY26 across nearly 100 renewable energy developers. Its assessment found that nearly 21% of under-construction BESS capacity, equivalent to about 12 GWh, faces weak returns. The current price prevents some projects from achieving the 12%–14% internal rate of return typically targeted by developers.
The situation could also influence future BESS tariffs. The increased battery cost impacts the realistic equipment prices while quoting the upcoming bids, which drags the tariff trend upward. Earlier projects were awarded at tariffs of around INR 1.48 lakh per MW per month, while INR 2-2.2 lakh per MW per month is now seen as more viable, according to Kartik Teltia, Managing Director of Solar World Energy Solutions.
For projects already awarded at lower tariffs, however, the immediate concern remains about the impact of rising costs on execution and financial returns.
Despite these challenges, India’s energy storage market continues to develop rapidly. The current price pressure highlights the importance of accurate cost assumptions and careful project planning and timing when developers bid for large-scale storage projects.