India's Battery Storage Set for 12-Fold Surge by FY32, Reaching 60 GW Capacity.

India’s Battery Energy Storage System (BESS) sector is poised for transformative growth, with a funding opportunity estimated at ₹3.5 lakh crore by FY2032, as per a report by SBI Capital Markets. In the near term, an additional ₹80,000 crore in investments—primarily focused on cell manufacturing—will fuel the expansion of this ecosystem.

This immense opportunity covers both project-level and upstream investments, supported by strong Power Purchase Agreements (PPAs) and Power Sale Agreements (PSAs) with reputable DISCOMs, as well as adaptable project models and cell technologies. Risks associated with BESS, such as declining battery prices and the transition to high-capacity batteries, are mitigated by competitive tariffs and DISCOMs’ Energy Storage Obligation (ESO) and Renewable Purchase Obligation (RPO) targets, aligned with the lifespan of PPAs.

The capital expenditure in battery manufacturing is expected to surge as established and new companies scale up operations, and technological advancements in the field are driving mergers and acquisitions, offering growth avenues for companies seeking to expand. India’s shift towards a Variable Renewable Energy (VRE) future is anticipated to triple VRE’s generation share by FY32. BESS storage capacity is expected to see a 12-fold increase, reaching 60 GW by FY32, with the percentage of renewable energy tenders that include storage components rising from 5% in FY20 to 23% in FY24.

BESS and Pumped Storage Projects (PSP) are becoming the dominant energy storage solutions, set to collectively capture nearly the entire market. BESS is favored for its flexibility and rapid response, while PSP offers complementary peak-shaving benefits, although it faces longer development timelines. BESS capacity is projected to reach 47 GW by FY32, with PSP capacity expanding fourfold to 19 GW.

The sector’s rapid growth is underpinned by government initiatives like the Production-Linked Incentive (PLI) schemes, fostering indigenization and a comprehensive approach to the battery ecosystem. Analysts at SBI Capital Markets project that these efforts could unlock an investment opportunity exceeding ₹5 trillion, promoting energy security while maintaining competitive tariffs.

Key to reducing BESS costs is the expansion of domestic battery cell manufacturing and a robust component supply chain. With batteries and components constituting 80% of BESS costs, and much of the cell manufacturing concentrated in China, India’s PLI for Advanced Cell Chemistry aims to add 55 GWh of new capacity. Major players have already announced nearly 120 GWh in new capacity, aligning with short-term demand. Further capacity expansions and a strong ecosystem for components—such as cathodes, anodes, electrolytes, and separators—are anticipated.

Supportive policies, including waived ISTS transmission charges and ESO/RPO mandates, are expected to drive demand along the BESS value chain, accelerating project development, cell manufacturing, and component production. This regulatory backing positions India’s BESS sector for significant growth over the coming decade.

HBL