India is scaling up Battery Energy Storage Systems to support renewable energy, with a target of 80GW by 2036. While major companies like Adani Green and NTPC are investing in these projects, experts suggest that direct financial benefits may be slow to arrive. In the near term, domestic equipment and engineering firms are likely to see faster revenue growth than project developers.
The Indian power sector is undergoing a major transition as it integrates Battery Energy Storage Systems, or BESS, to solve the intermittency of renewable energy. Because solar power is only generated during the day, storage is required to supply electricity during peak evening hours. The Central Electricity Authority has set a target of 80GW of capacity by 2036, a massive jump from the current installed base of less than 1GW.
Strategic Shift for Renewable Developers
Large energy players are now shifting toward 'firm and dispatchable' renewable energy models that include battery storage. For instance, Adani Green Energy has commissioned 3.37GWh of storage at its Khavda park in Gujarat, with plans to add 11GWh more. NTPC and ACME Solar are also integrating storage into their portfolios to ensure more reliable power delivery. Other companies, including Tata Power, JSW Energy, Waaree Energies, and Premier Energies, are positioning themselves similarly to win new government tenders that increasingly favor solar-plus-storage solutions.
Despite this momentum, the immediate impact on earnings for these large developers remains limited. Analysts note that BESS projects currently make up only a small fraction, roughly 2-5%, of these companies' total portfolio value. While this may increase to 20-25% over the long term, developers face a period of capital-intensive investment before these assets contribute significantly to the bottom line.
Challenges in Manufacturing and Profitability
While developers handle the projects, the manufacturing side faces its own set of hurdles. Domestic battery pack manufacturers are operating on thin margins, with some estimates indicating EBITDA margins of approximately 3%. The cost to produce a battery pack, including the landed cost of imported cells, remains high. Selling prices hover near $79/kWh against production costs of roughly $76.6/kWh, resulting in a post-tax Return on Capital Employed of about 10%.
Analysts at Ambit Capital have flagged a consolidation phase in the market, noting that high battery costs may delay project timelines. In fact, incremental installations are projected to be limited to about 5GWh in FY27. There is also a risk that merchant projects—those relying on buying electricity when it is cheap and selling when it is expensive—may struggle to maintain profitability without diverse revenue streams.
Opportunities for Equipment Suppliers
For investors, the immediate winners may not be the project developers, but the companies supporting the broader infrastructure. Since the actual battery cells are largely imported from China, the domestic value lies in engineering, procurement, and construction services. Manufacturers of transformers, inverters, and power substations are expected to benefit early as these components are essential for every storage project. Tracking the execution timelines of these projects and the pace of government auctions will be key for investors to monitor the health of the sector.