Key Takeaways
- • India's Ministry of Power Secretary Pankaj Agarwal said on November 5 that discoms will be required to procure energy storage alongside renewable power, converting the current advisory into a mandate with rules due by March 2027, with options of 10% and 20% two-hour storage under study.
- • The Union Cabinet approved a INR 14,500 crore (about INR 145 billion) viability gap funding scheme supporting 92 GWh of grid-scale storage from FY2026-27 to FY2030-31, including 30 GWh of BESS and a minimum 40% local content requirement.
- • Local cell capacity lags demand: of 50 GWh planned under the battery PLI scheme, only 1 GWh had entered production as of February 2026, while China's lithium-ion battery exports to India rose about 103% YoY by value in January–September 2026.
- • Execution of the first two VGF tranches trails awards, with only 0.5 GWh commissioned across both, and storage tender volumes fell about 66% month-on-month in September to roughly 0.98 GW.
- • China's export controls on battery-related items remain suspended until January 10, 2027, and the VAT export rebate on batteries ends January 1, 2027, adding uncertainty to Indian cell makers' access to Chinese inputs.
Summary
India is moving from a storage policy built on subsidies and advisories to one that combines subsidies with mandates. According to remarks by Pankaj Agarwal, Secretary of the Ministry of Power, made at the Bharat Renewable Energy Summit in New Delhi on November 5, the central government plans to require distribution companies (discoms) to procure energy storage alongside renewable power. The rules are set to be finalized by March 2027, and the Ministry is studying two tiers, 10% and 20%, each with a two-hour duration, with the final ratio to be set after stakeholder consultation. The day before, the Union Cabinet approved a INR 14,500 crore viability gap funding scheme supporting 92 GWh of grid-scale storage from FY2026-27 to FY2030-31, including 30 GWh of battery energy storage systems and a minimum local content requirement of 40% for BESS projects.
The demand picture is layered. In February 2025 the Ministry of Power issued an advisory for co-located storage equal to 10% of installed capacity. In September 2026 the Central Electricity Authority released draft amendments requiring new ground-mounted solar and onshore wind projects commissioned after July 1, 2027 to install co-located storage, with a four-hour requirement for projects commissioned between July 2029 and June 2031. The procurement mandate places the obligation on buyers, while the CEA draft sets it on generators. Grid constraints are the immediate driver: about 11% of solar generation was curtailed during the hottest months of 2026, even as India added about 45 GW of solar in FY2025-26 and cumulative solar capacity exceeded 171 GW by September 2026. SMM notes that the mandate's base should be newly signed procurement, since more than 43.9 GW of awarded renewable capacity had yet to sign power sale agreements as of the end of September 2025; a 10% two-hour requirement on that volume would imply about 8.8 GWh of one-off demand, or 17.6 GWh at 20%.
Subsidy execution has lagged. Tranche 1 had issued letters of award for 12.7 GWh and reached financial close on 6.54 GWh as of July 2026, while Tranche 2 had awards for 22.43 GWh and financial close on 5 GWh. Only 0.5 GWh across both had been commissioned. Tariffs are a factor: about 75% of two-hour standalone capacity awarded in 2025 cleared below the INR 2.3 lakh per MW per month benchmark, though 2026 awards such as MSEDCL's 2 GW/4 GWh project at INR 2.38–2.40 lakh have recovered. CEA data show about 198.4 GWh of battery projects in the pipeline as of September 30, 2026, with 14.5 GWh operating, though other estimates of commissioned capacity differ. Storage tenders totaled about 0.98 GW in September, down about 66% month-on-month and about 60% year-on-year, partly because some tenders were reissued after bids deviated from benchmarks.
Localization is lagging. The battery PLI scheme, approved in May 2021 with INR 18,100 crore and targeting 50 GWh, has awarded 40 GWh to Ola Cell Technologies, Reliance New Energy Battery, Reliance New Energy Battery Storage and ACC Energy Storage, but only Ola had started production, at 1 GWh, as of February 2026. Beneficiaries had invested a cumulative INR 5,180 crore by the end of May 2026 without claiming incentives, citing restricted technology access, skilled labor shortages, reliance on imported equipment and lack of local supply of cathode, anode and electrolyte materials, according to the Ministry of Heavy Industries' reply to Parliament. In July 2026 the Ministry reissued the remaining 10 GWh through a global tender for stationary grid-scale cells, with bids closed on October 13, requiring 25% local value addition within two years and 40% within five years. Waaree's 5.15 GWh BESS container plant began production in July 2026, and Premier Energies plans its first storage line for June 2027.
China's policy shapes the supply side. Announcement No. 58 of 2025 from the Ministry of Commerce and General Administration of Customs imposed export controls on lithium battery and artificial graphite anode items; the suspension has been extended to January 10, 2027, and reinstatement would require licenses for exports including to India. China will also eliminate its export VAT rebate on batteries from January 1, 2027. China's lithium-ion battery exports to India rose about 103% year-on-year by value in January–September 2026, underscoring that imports remain the main source of cells and core materials until domestic capacity scales.
The demand picture is layered. In February 2025 the Ministry of Power issued an advisory for co-located storage equal to 10% of installed capacity. In September 2026 the Central Electricity Authority released draft amendments requiring new ground-mounted solar and onshore wind projects commissioned after July 1, 2027 to install co-located storage, with a four-hour requirement for projects commissioned between July 2029 and June 2031. The procurement mandate places the obligation on buyers, while the CEA draft sets it on generators. Grid constraints are the immediate driver: about 11% of solar generation was curtailed during the hottest months of 2026, even as India added about 45 GW of solar in FY2025-26 and cumulative solar capacity exceeded 171 GW by September 2026. SMM notes that the mandate's base should be newly signed procurement, since more than 43.9 GW of awarded renewable capacity had yet to sign power sale agreements as of the end of September 2025; a 10% two-hour requirement on that volume would imply about 8.8 GWh of one-off demand, or 17.6 GWh at 20%.
Subsidy execution has lagged. Tranche 1 had issued letters of award for 12.7 GWh and reached financial close on 6.54 GWh as of July 2026, while Tranche 2 had awards for 22.43 GWh and financial close on 5 GWh. Only 0.5 GWh across both had been commissioned. Tariffs are a factor: about 75% of two-hour standalone capacity awarded in 2025 cleared below the INR 2.3 lakh per MW per month benchmark, though 2026 awards such as MSEDCL's 2 GW/4 GWh project at INR 2.38–2.40 lakh have recovered. CEA data show about 198.4 GWh of battery projects in the pipeline as of September 30, 2026, with 14.5 GWh operating, though other estimates of commissioned capacity differ. Storage tenders totaled about 0.98 GW in September, down about 66% month-on-month and about 60% year-on-year, partly because some tenders were reissued after bids deviated from benchmarks.
Localization is lagging. The battery PLI scheme, approved in May 2021 with INR 18,100 crore and targeting 50 GWh, has awarded 40 GWh to Ola Cell Technologies, Reliance New Energy Battery, Reliance New Energy Battery Storage and ACC Energy Storage, but only Ola had started production, at 1 GWh, as of February 2026. Beneficiaries had invested a cumulative INR 5,180 crore by the end of May 2026 without claiming incentives, citing restricted technology access, skilled labor shortages, reliance on imported equipment and lack of local supply of cathode, anode and electrolyte materials, according to the Ministry of Heavy Industries' reply to Parliament. In July 2026 the Ministry reissued the remaining 10 GWh through a global tender for stationary grid-scale cells, with bids closed on October 13, requiring 25% local value addition within two years and 40% within five years. Waaree's 5.15 GWh BESS container plant began production in July 2026, and Premier Energies plans its first storage line for June 2027.
China's policy shapes the supply side. Announcement No. 58 of 2025 from the Ministry of Commerce and General Administration of Customs imposed export controls on lithium battery and artificial graphite anode items; the suspension has been extended to January 10, 2027, and reinstatement would require licenses for exports including to India. China will also eliminate its export VAT rebate on batteries from January 1, 2027. China's lithium-ion battery exports to India rose about 103% year-on-year by value in January–September 2026, underscoring that imports remain the main source of cells and core materials until domestic capacity scales.
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