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India will need 888 gigawatt-hours (GWh) of energy storage capacity by 2035-36, up from barely 1 GWh today, underscoring the scale of investment required to support the country’s renewable energy transition, according to a new report.
The report India BESS Market Review, released by the India Energy Storage Alliance (IESA) and Customised Energy Solutions (CES) at India Energy Storage Week (IESW) 2026, projects a cumulative energy storage system (ESS) capacity of 888 GWh by 2035-36, comprising 321 GWh of battery energy storage systems (BESS) and 567 GWh of pumped storage projects (PSP). Annual ESS additions are expected to accelerate from 50.2 GWh in 2026 to 138 GWh by 2036, reflecting the rapid expansion required to integrate growing shares of renewable energy into the grid. The projections draw on estimates from the Union Ministry of New and Renewable Energy (MNRE), state energy departments and IESA’s market analysis.
The report also shows that India’s installed BESS capacity expanded more than elevenfold within six months, rising from 0.78 GWh in December 2025 to 8.7 GWh by June 2026. Nearly 7.9 GWh of new capacity was commissioned during the first half of 2026, with merchant projects accounting for around 70 per cent of the additions. IESA expects the country’s operational BESS capacity to reach 12-15 GWh by the end of 2026.
Tendering activity has also accelerated sharply. According to the report, India has floated 281 GWh worth of energy storage tenders since 2018, of which 105 GWh is under execution, 110 GWh remains under tendering, and 53 GWh has been cancelled. Eighteen projects with a combined capacity of 8.5 GWh are operational.
However, lenders and developers at a dedicated session on financing battery storage argued that deploying hundreds of gigawatt-hours of storage will depend less on technology than on reducing financial risk and creating confidence among lenders.
Presenting an analysis, Benny Bertagnini, Senior Associate, RMI, said battery storage projects requiring 321 GWh over the next decade would entail cumulative investments of around Rs 4-5 lakh crore. While battery prices have declined by nearly 75 per cent over the past three years and government support through the National Energy Storage Framework has encouraged a pipeline of more than 110 GWh of projects, the challenge now is ensuring that announced projects actually reach deployment rather than remaining on paper.
Bertagnini argued that financing costs remain one of the biggest barriers. According to the analysis, debt financing can account for nearly 20 per cent of a battery storage project’s total cost. Reducing borrowing costs from around 15 per cent to about 9 per cent could lower overall project costs by roughly 6 per cent.
He said financial institutions need assessment frameworks tailored specifically to battery storage instead of treating projects like conventional solar assets. Such frameworks should evaluate battery degradation, round-trip efficiency, safety performance and levelised cost of storage, alongside project economics.
He also called for wider use of blended finance instruments, including concessional capital, first-loss facilities, credit guarantees and risk-sharing mechanisms from development finance institutions and multilateral banks. Similar approaches helped accelerate India’s solar sector and could encourage commercial lenders to finance battery storage at scale. Insurance products such as surety bonds that guarantee battery performance could also improve lender confidence, although they would need to be balanced against project costs.
Echoing these concerns, Asesh Chakrabarti, Deputy General Manager at the State Bank of India (SBI), said lenders view battery storage as a promising but still evolving asset class because of limited operational history.
According to Chakrabarti, lenders evaluate multiple risks rather than a single factor. These include battery degradation, round-trip efficiency, technology performance, enforceability of equipment warranties, project cash flows, the financial health of power purchasers and long-term revenue certainty.
He noted that several projects which had already achieved financial closure failed to move ahead because battery prices rose sharply after bids were submitted, prompting suppliers to withdraw earlier price commitments. Developers who delayed procurement in anticipation of further price declines faced additional risks.
To mitigate these challenges, he said developers should place equipment orders quickly after financial closure instead of speculating on future price movements and should maintain adequate contingency buffers in project costs. The absence of long-term operational data also makes it difficult for lenders to quantify risks accurately and price loans appropriately.
“Technology challenges exist everywhere, but the larger issue is the limited ability to quantify risks because of the lack of operational track record,” Chakrabarti said. “The more predictable project performance and revenue become, the lower the financing cost.”
He added that SBI has established sector-specific risk assessment models for emerging technologies such as advanced battery manufacturing and battery storage, while partnering with industry bodies and research institutions to strengthen project appraisal methodologies.
Developers, meanwhile, pointed to implementation bottlenecks beyond financing.
Satish Talmale, Chief Executive Officer of EnerGrid, said battery storage projects require far more engineering and operational planning than initially assumed. Indigrid spent nearly a year evaluating battery chemistries, equipment suppliers and system integration before commissioning pilot projects that eventually informed larger commercial deployments.
He argued that tender design remains one of the sector’s weakest links. Procuring agencies need to define use cases clearly, specify charging requirements upfront and incorporate realistic technical specifications, particularly around safety, fire protection and operational performance. Better-designed tenders would reduce uncertainty for both developers and financiers.
Tanya Singhal, Vice President and India Country Head at the Global Energy Alliance for People and Planet (GEAPP), said storage should no longer be viewed only as an add-on to renewable energy projects.
“The true measure of success is not just how many gigawatts we install, but how much renewable energy we can actually deliver and utilise,” she said during the inaugural session. Storage, she argued, must be integrated across generation, transmission, distribution and end-use to create a flexible and resilient electricity grid.
Industry leaders also highlighted the rapid evolution of policy support. According to the IESA report, the government has introduced multiple demand-side measures, including the National Framework for Energy Storage, viability gap funding for standalone BESS projects, competitive bidding guidelines, market access for storage in ancillary services and recognition of energy storage as infrastructure. On the supply side, measures include production-linked incentives for advanced chemistry cells, customs duty exemptions for critical battery minerals, incentives for critical mineral recycling and efforts to strengthen domestic manufacturing. Several states have also announced dedicated storage policies and capacity targets.
Manufacturing capacity is also expected to expand significantly. India currently has around 2 GWh of lithium-ion cell manufacturing capacity, but announced investments could raise this to nearly 110 GWh by 2030, while battery pack-to-container manufacturing capacity is projected to reach 180-200 GWh.
Despite these policy tailwinds, speakers agreed that the next phase of growth will depend on reducing uncertainty rather than simply announcing new projects.
As Bertagnini noted, the sector needs more operational data, stronger contracts, standardised technical specifications and innovative financing structures that lower perceived risks. Only then, they argued, will commercial capital be able to finance the hundreds of gigawatt-hours of storage India requires to support its clean energy ambitions.