Battery storage costs decline sharply as policy support expands

The cost of battery energy storage systems discovered through competitive bidding has fallen steeply over the past two years, supported by viability gap funding schemes and transmission charge waivers, according to information presented in Parliament.

The cost of Battery Energy Storage System (BESS) capacity discovered through tariff based competitive bidding during 2022 to 2023 was about Rs 10.18 per kWh, assuming the storage system is used for two cycles per day. In recent bids, the discovered cost has reduced to about Rs 2.1 per kWh without viability gap funding, based on the same two-cycle daily usage. However, market trends indicate that BESS is likely to be operated at around 1.5 cycles per day, which corresponds to a storage cost of about Rs 2.8 per kWh. Based on recent tenders, the average tariff for electricity from solar projects is in the range of Rs 2.5 per kWh.

To support affordable deployment, the Ministry of Power (MoP) is administering a Viability Gap Funding (VGF) scheme for setting up 13,220 MWh of BESS capacity, with budgetary support of Rs 3,760 crore. In June 2025, MoP launched another VGF scheme for the development of 30 GWh of BESS capacity, with financial support of Rs 5,400 crore through the Power System Development Fund (PSDF).

Transmission cost relief has also been extended. A waiver of Inter-State Transmission System (ISTS) charges is available for a period of 12 years for co-located BESS projects commissioned by June 2028. For non-co-located BESS projects, the ISTS charges waiver applies to projects commissioned before June 2025. After this date, the waiver will be reduced annually in graded steps of 25 per cent.

On the manufacturing side, the Ministry of Heavy Industries (MHI) is implementing the Production Linked Incentive (PLI) scheme titled National Programme on Advanced Chemistry Cell (ACC) Battery Storage. The scheme aims to establish 50 GWh of domestic Advanced Chemistry Cell manufacturing capacity, of which 10 GWh is earmarked for Grid Scale Stationary Storage (GSSS) applications. The scheme was approved in May 2021 with a total outlay of Rs 18,100 crore.

According to the government, the PLI scheme is intended to encourage investment in domestic cell manufacturing for grid scale applications, reduce dependence on imports, and contribute to lower BESS costs over time.

This information was provided by the Minister of State for Power, Shri Shripad Yesso Naik, in a written reply in the Rajya Sabha on 15 December 2025.

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