Ambit Capital reports that India's battery energy storage market is facing a slowdown due to rising costs and execution challenges. Despite these industry-wide pressures, the brokerage maintains a positive outlook on NTPC, citing its scale and competitive position. Investors should note that sector growth is currently falling short of government targets as companies grapple with battery life-cycle risks and procurement delays.
The battery energy storage system (BESS) market in India is currently undergoing a difficult reset phase, according to a recent assessment by Ambit Capital. The sector is struggling with several immediate challenges, including rising battery costs, aggressive bidding by developers that ignored long-term maintenance costs, and persistent delays in project execution. These factors have effectively slowed down procurement, with the industry now expecting only 5 gigawatt-hours (GWh) of new capacity this year, a figure significantly below the 23 GWh target set by the Central Electricity Authority for FY27.
Challenges in Battery Procurement and Profitability
One of the primary concerns for developers is the escalation in battery prices, which have climbed to $80 per kilowatt-hour, an increase of $15 per kilowatt-hour in recent months. Many firms that bid aggressively for earlier projects reportedly underestimated critical technical complexities, such as battery degradation over time and auxiliary power consumption. These factors are vital for project profitability but are much more complex to manage than those in traditional solar or wind projects. In response, regulators are considering stricter technical rules for future tenders, and states such as Maharashtra and Rajasthan are re-evaluating their procurement plans.
NTPC's Strategic Position Amid Sector Pressure
Despite the negative outlook for much of the renewable energy sector, Ambit Capital continues to favor NTPC. The brokerage highlighted the state-owned power giant's ability to navigate these challenges, though it emphasized that the company's future performance is heavily tied to its ability to win new orders. If the company fails to secure a consistent pipeline of new projects, analysts suggest it could face limited growth prospects in the current environment.
Production-Linked Incentive (PLI) Execution Delays
Beyond project development, the manufacturing side of the energy storage value chain is also facing pressure. The production-linked incentive scheme for battery cell manufacturing has seen slower-than-expected progress. Several major players have faced setbacks: Reliance Industries has requested a two-year extension on its project timelines, while Ola Electric Mobility has sought modifications to its capacity commitments. Furthermore, Exide Industries, while having commissioned some capacity, is currently navigating difficulties in commercial shipments. These delays are largely linked to the steep learning curve in advanced battery technology and challenges in sourcing stable demand.
Investors monitoring the sector should track how the government adjusts policy support, such as the potential increase in viability gap funding, and whether these changes help stabilize project economics. The transition from pure solar and wind to firm and dispatchable renewable energy (FDRE) projects remains a key area to watch as these projects move toward their fiscal year 2028 commissioning dates.