India is set to add 45-50 gigawatt-hour (GWh) of battery energy storage system (BESS) capacity over the current and next financial year, compared with 1 GWh at the end of the previous fiscal year, according to Crisil. The ratings agency attributed the expansion to a strong project pipeline and continued policy support for renewable energy integration.

Crisil’s analysis covered bids awarded between FY24 and FY26 across 100 renewable energy developers. It said the increasing share of renewable energy, which accounted for 39 per cent of installed power generation capacity and 15 per cent of electricity generated in the previous fiscal year, was increasing the need for storage.

Renewable generation is intermittent, creating a requirement for firm and peak-hour power, particularly when evening demand rises after solar generation declines. Storage-linked projects represented nearly 40 per cent of total auctioned capacity in FY26, compared with about 5 per cent in each of FY24 and FY25, as the government accelerated auctions supporting grid integration.

Crisil said 50-55 GWh of BESS capacity was scheduled for commissioning across FY27 and FY28. Government-led auctions accounted for about 40 GWh of this capacity, with distribution utilities serving as offtakers, while the remaining 10-15 GWh was intended for commercial and industrial users or the merchant market.

However, about 12 GWh, or 21 per cent of under-construction BESS capacity, faces weak return potential because battery prices have risen in 2026 while project tariffs were bid at relatively low levels. Crisil said developers that secured projects in 2025 may have assumed battery prices would continue falling, but current costs could make it difficult to achieve typical internal rates of return of 12-14 per cent. Around 8-9 GWh also faces limited implementation experience among sponsors, while dependence on overseas suppliers remains an equipment procurement risk.