Q1 2025: ESS Accounts For 64% Utility-Scale Tendering Activity 

India’s Standalone Energy Storage Systems (ESS) are becoming the backbone of India’s utility-scale ESS auctions, accounting for 64% of the total tenders issued between January and March 2025 alone, according to a new report by the Institute for Energy Economics and Financial Analysis (IEEFA) and JMK Research & Analytics. The report finds that various Indian agencies tendered 6.1 gigawatts (GW) of Standalone ESS capacity in the first three months of 2025. 

Rise in Issuance Of Standalone ESS Tenders With VGF

The report found, “There has been an exponential rise in the issuance of Standalone ESS tenders in India since 2022. From just 0.5GW across one tender in 2022, the total tendered capacity surged more than 50 times to 31.2GW by March 2025 in terms of cumulative capacity.”

The study showed, “In the first three months of 2025, 11 new Standalone ESS tenders were issued, totaling 6.125GW, exceeding the entire Standalone ESS capacity issued in 2024. The VGF scheme, which offers up to 30% capital cost subsidy with a limit of Rs4.6 million per megawatt-hour (MWh) or US$53,801/MWh (market component under Tranche-1), is primarily driving this surge. Nine of the 11 tenders utilized this support. The incentives have significantly lowered financial barriers, making standalone storage more viable for developers and utilities.”

Whereas, since January 2022, approximately 7GW of standalone ESS capacity has been awarded across 12 tenders. The auction trends for Standalone ESS tenders highlight the evolving cost dynamics and deployment challenges in India’s energy storage sector.

The study highlighted the cost gap between PHS and BESS is widening, with BESS benefiting from faster deployment
(18-24 months), flexibility in site selection, and strong policy incentives. With continued battery price declines and government support, BESS will likely dominate future Standalone ESS tenders, ensuring faster and more cost-effective energy storage deployment in India’s evolving renewable energy landscape.

“Standalone ESS are ideal to facilitate the rapid development and deployment of variable renewable energy (VRE) resources across India. Energy storage is integral to renewable integration and grid resilience, and Standalone ESS will play a defining role in shaping a reliable and flexible energy system,” says the report’s contributing author, Charith Konda, Energy Specialist – India Mobility and New Energy, IEEFA.  “They operate as flexible, independent assets that can respond to grid requirements rather than generator constraints, offering network stability and optimising energy use,” he added.

The government’s viability gap funding (VGF) scheme, which offers up to 30% support to project developers for capital expenditure on standalone BESS projects, has been a key driver of the surge in Standalone ESS tenders.  “This initiative has addressed high initial project capital expenditure (CAPEX) of BESS projects and enhanced project viability. The VGF framework has also made projects more economically viable,” says the report’s co-author, Prabhakar Sharma, Senior Consultant, JMK Research & Analytics. 

“In recent auctions, battery energy storage system tenders in Maharashtra and Rajasthan secured tariffs as low as Rs219,000-221,000 per megawatt (MW) a month (US$2,561-$2,586/MW/month), representing almost a 40% reduction compared with non-VGF projects with similar specifications,” he added.

While utilities, grid operators, or third-party entities can own and deploy Standalone ESS, innovative new business models are emerging. Energy Storage as a Service (ESaaS) lowers the entry barrier for users by offering storage as a service through subscription or pay-per-use arrangements.

The heightened interest in Standalone ESS is attracting new players to the sector. Large, established power producers such as JSW Energy, Greenko and Torrent Power have been joined by newer entrants Pace Digitek, Oriana Power, Kintech Synergy and Bondada Engineering with Battery + ESS (BESS)-based tenders. While the initial growth has been impressive, the nascent Standalone ESS market is not immune to the challenges facing other sectors of India’s energy transition.

“A key barrier has been the delay or cancellation of power sale and storage agreements, often triggered by offtakers anticipating further tariff reductions due to falling battery prices,” says the report’s co-author, Pulkit Moudgil. “These uncertainties have already led to the cancellation of 6.4GW of awarded capacity.” 

Delay In Solar Manufacturing Capcaity 

Beyond contracting delays, the sector faces structural hurdles related to supply chains, manufacturing, and financing. India’s installed BESS capacity remains limited, with most utility-scale projects relying on a small pool of vendors, many of whom operate through international joint ventures. A lack of domestic battery cell manufacturing, compounded by heavy dependence on critical mineral imports such as lithium and cobalt, further exposes the market to global price
volatility and geopolitical risks. Additionally, smaller developers struggle to secure affordable project financing due to investor caution regarding early-stage risks and long payback periods.

“Looking ahead, India’s Standalone ESS market stands at a critical inflection point,” says Sharma.  “With the right mix of sustained policy support, streamlined regulatory processes, and targeted investments in domestic manufacturing and supply chains, the sector can overcome early-stage barriers and unlock its full potential,” he adds.