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India will need 888 gigawatt-hours (GWh) of energy storage capacity by 2035-36, nearly 900 times its current installed capacity of around 1 GWh, as the country prepares for rapidly rising electricity demand while integrating a much larger share of renewable energy into its power system, according to a new report.
The report, India BESS Market Review, released by the India Energy Storage Alliance (IESA) and Customised Energy Solutions (CES) released at the 12th India Energy Storage Week (IESW) 2026, projects 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 increase from 50.2 GWh in 2026 to 138 GWh by 2036, reflecting the pace at which India will have to build storage infrastructure to support its clean energy transition. The projections are based on estimates from the Ministry of New and Renewable Energy (MNRE), state governments and IESA's market assessment.
India's battery storage market has already begun expanding rapidly. Operational BESS capacity increased from 0.78 GWh in December 2025 to 8.7 GWh by June 2026, with another 2-3 GWh expected to be commissioned by the end of the year, taking installed capacity to 12-15 GWh. Since 2018, India has floated 281 GWh of energy storage tenders, 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 currently operational.
The ambitious storage targets come against the backdrop of a sharp rise in electricity demand. Union Power Minister Manohar Lal said India's peak electricity demand is expected to reach 300 gigawatts (GW) next year, driven by the rapid expansion of data centres, artificial intelligence and electric vehicles. "According to estimates, we have already reached 271 GW and projections suggest the peak may rise even further this year. Our available capacity has grown to 284 GW, which enables us to meet all types of demand. But with the accelerating pace of electrification, we must prepare for 300 GW peak demand next year," the minister said at IESW on July 8.
Installed power generation capacity has increased from 249 GW in 2014 to 445 GW, while solar capacity has grown from just 3 GW to 137 GW during the past 12 years. Non-fossil fuel capacity has similarly expanded from 81 GW to 291 GW, Lal noted. "As our needs rise, energy storage becomes a national imperative, ensuring the power generated can be used whenever and wherever it's needed," he said. "While earlier electricity had to be consumed the moment it was generated, advances in storage technologies now make it possible to store power and dispatch it according to demand."
The urgency of expanding storage was reinforced just two days before the conference when India's electricity system crossed another clean energy milestone. On July 6, India met more than half of its electricity demand through clean energy, including hydropower, for around 15 minutes, marking the first time this year the country's electricity system crossed the symbolic 50 per cent threshold and the second consecutive year it achieved the milestone, according to data from the Ministry of Power's Merit Order Despatch of Electricity for Rejuvenation of Income and Transparency (MERIT). It was first highlighted through an analysis by Ember based on MERIT data.
India first crossed the 50 per cent mark on July 29, 2025, when renewable energy met 51.5 per cent of the country's electricity demand of 203 GW, according to the Press Information Bureau, citing the Ministry of New and Renewable Energy.
At 11:46 am IST on July 6, clean energy accounted for 50.2 per cent of electricity generation. Renewable energy, including hydropower, supplied 47 per cent of generation between 11 am and noon, while coal and gas together accounted for the remaining 50 per cent. Coal-fired generation averaged around 120 GW between 8 am and 5 pm, even as electricity demand remained between 205 GW and 225 GW before peaking at 235 GW around 9:30 pm. Across the day, non-fossil sources, including nuclear power, contributed 34 per cent of total electricity generation, the highest daily share recorded in the current financial year.
Binit Das, Programme Manager, Renewable Energy at the Centre for Science and Environment, New Delhi, said the achievement was particularly significant because it came during the southwest monsoon, when cloud cover typically suppresses solar generation. "The fact that non-fossil sources still reached 50 per cent suggests that India's growing solar capacity is now large enough to make a strong midday contribution even under monsoon conditions," he said. Solar's share in India's installed power capacity expanded from just 2 per cent in 2015-16 to around 29 per cent, or nearly 157 GW, by May 2026, fundamentally changing the country's daytime electricity mix.
Other sectoral experts said the latest milestone reflects a structural shift rather than a one-off event. Bruce Douglas, Chief Executive Officer of the Global Renewables Alliance, said the achievement demonstrated what modern electricity systems can deliver. "India powering more than half of its electricity demand with clean energy, even for a brief period, is a powerful demonstration of what's now technically possible," Douglas said. "The conversation is now shifting from whether a clean grid is achievable to how quickly we can deliver it every hour of every day through continued investment in storage, grid flexibility and renewable capacity."
According to Disha Agarwal, Fellow at the Council on Energy, Environment and Water (CEEW), the milestone builds on an emerging trend. "Clean energy has met over 45 per cent of India's total electricity demand for more than 50 days since May this year. Today marks a significant milestone. For the second consecutive year, clean energy sources, including renewables, hydropower and nuclear, met 50.02% of the country's total demand of 221.5 GW at 11:46 am. This already signals a lasting change in the supply mix," she said.
Agarwal added that the next frontier would be scaling flexible energy storage alongside utility-scale and distributed renewable energy systems so that increasing shares of evening demand can also be met through low-cost clean power.
Das said the generation profile on July 6 also illustrated why storage has become the next critical challenge. While electricity demand remained relatively stable through most of the day, it rose sharply after sunset when solar generation declined. "Carrying the midday surplus into the evening peak would require storage. India's pumped-storage and battery fleet currently discharges around 23.8 GWh a day on average, a scale still well short of what is needed to meaningfully smooth ramps of this size," he said.
He added that although non-fossil sources supplied a record 34 per cent of electricity over the full day, evening ramp requirements on conventional power plants have nearly doubled from around 36 GW in May 2023 to about 74 GW in May 2026, highlighting how rapidly flexibility requirements are increasing.
The conference discussions echoed that assessment. Presenting an analysis, Benny Bertagnini, Senior Associate at RMI, said deploying 321 GWh of battery storage over the coming decade would require investments of around Rs 4-5 lakh crore. Although battery prices have fallen by nearly 75 per cent during the past three years and policy measures have helped create a pipeline exceeding 110 GWh, the biggest challenge now is ensuring projects reach construction and operation.
According to Bertagnini, debt financing accounts for nearly 20 per cent of overall project costs. Lowering borrowing costs from around 15 per cent to 9 per cent could reduce total project costs by roughly 6 per cent. financial institutions need project assessment frameworks tailored specifically to battery storage rather than evaluating them like conventional renewable energy projects. Such frameworks should assess battery degradation, round-trip efficiency, safety, performance guarantees and the levelised cost of storage alongside conventional financial parameters, he said.
Bertagnini also called for wider use of blended finance instruments, including concessional capital, first-loss facilities, credit guarantees and risk-sharing mechanisms from multilateral development banks. Similar financing structures helped India's solar sector scale rapidly and could now unlock commercial investment in battery storage.
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.