Bold claim: India’s record-low battery storage bids threaten the viability of projects and could slow a renewable surge. But here’s where it gets controversial: the race to the deepest discounts may be undermining safety, reliability, and true value.
Overview
- Since 2021, India has tendered 83 gigawatt-hours (GWh) of battery storage capacity, yet only about 36 GWh have been awarded, with roughly 15.4 GWh in open tender and 18 GWh currently under construction. Around 8 GWh have been cancelled, according to the India Energy Storage Alliance (IESA).
- Recent bids in India’s top renewable state Rajasthan have come in at under 1.5 rupees per kilowatt-hour (kWh), roughly 2 U.S. cents per kWh, a level industry observers describe as extraordinarily low.
- Some bidders are seeking to sell awarded projects for a premium, turning the process into a financing play rather than a straightforward build-and-operate exercise.
Why this matters
India aims to double its renewable capacity to 500 gigawatts by 2030, a goal that hinges on robust battery storage to smooth variability and balance the grid. The grid operator’s struggle with excess power highlights the systemic need for storage to unlock renewable potential. Without dependable storage, even abundant solar and wind can’t consistently meet demand, slowing progress toward the 2030 target.
What experts are saying
- The industry spirit behind ultra-low bids is real, but it risks creating a misalignment between price and performance. Experts note that the absence of clear technical eligibility criteria in tenders has attracted participants from non-core sectors, such as real estate and food processing, reducing the likelihood of project success. Established players are reportedly stepping back amid doubts about long-term viability.
- Analysts warn that persistently low tariffs may drive the use of cheaper, lower-quality batteries with shorter lifespans, particularly in hotter regions. While the upfront price looks attractive, lifespans, safety, and maintenance costs can erode value over time.
- Safety is a growing concern. Lithium-ion batteries, while common, carry fire and thermal runaway risks that demand stringent standards and monitoring, especially as installations scale and operate in diverse conditions.
Finance vs. fundamentals
- A number of winning bidders are reportedly not planning to build, instead seeking to monetize by selling the projects at a premium. This turning of storage tenders into a financial transaction raises questions about who ultimately bears project risk and who finances any potential underperformance.
- The ongoing debate centers on whether government support and tender design adequately incentivize durable, technically sound projects or unintentionally reward speculative financing moves.
Policy and industry responses
- IESA is urging a revision of tender guidelines to include clearer technical criteria and stronger performance benchmarks, aiming to curb entry by non-specialists and improve project quality.
- There is a push for a phased approach to domestic manufacturing incentives, including gradual increases in basic customs duty and targeted support for cell makers, to strengthen the local battery supply chain and reduce import dependence.
- Power Secretary Pankaj Agarwal has indicated that policy reviews remain active, with an emphasis on ensuring that storage tariffs align with value while maintaining safety and reliability.
What this means for beginners and practitioners
- Low bids can accelerate deployment, but if they compromise quality, safety, or long-term performance, the overall value proposition weakens. When evaluating storage projects, look beyond the price tag to assess battery chemistry, cycle life, temperature tolerance, maintenance plans, and warranties.
- For developers, the temptation to finance quickly must be balanced with solid engineering, procurement, and construction (EPC) standards, and realistic financial modeling that accounts for degradation, replacement costs, and potential policy shifts.
Discussion prompts
- Should tender guidelines include minimum technical criteria and safety standards, even if they raise initial project costs? Why or why not?
- If several projects are financially viable only on immediate premiums from resale, does that undermine the long-term reliability and financial health of the grid? How can policy prevent this while still encouraging investment?
- What mix of incentives is most effective to build a robust domestic storage ecosystem—tariff support, local manufacturing incentives, or stricter project eligibility rules? Would you favor a phased approach? Share your views in the comments.
