Battery Energy Storage Systems (BESS) have moved from being a technical curiosity to a central pillar of India’s power transition. The change is visible in three places at once: policy, procurement, and pricing. Government updates in 2024 – 2026 have put grid-scale storage firmly on the national agenda through Viability Gap Funding (VGF) schemes, transmission-charge waivers for eligible storage projects, and an explicit push to make storage investible as a mainstream asset class.
Procurement is accelerating, but it is also becoming more demanding. Many tenders now specify minimum discharge durations (often two hours), availability requirements (commonly two cycles per day), and grid-integration expectations, which directly shape project economics and technology choices.
Pricing is where the anxiety begins. India has already witnessed aggressive bids that some market participants consider difficult to sustain over a full lifecycle, raising concerns around execution quality, safety, warranties, and long-term performance.
For business owners, this is not just a power-sector story. Storage will influence cost structures, competitive advantage, reliability expectations, and even how “bankable” an energy-intensive business appears to lenders and investors. If you already have exposure to BESS (developer, EPC, integrator, component supplier, financer, or large consumer), or if your business depends on power quality and price stability, the question is no longer whether storage is coming. The question is whether you are positioned for the version of this market that will actually survive.
Why BESS is Suddenly Central to India’s Energy Narrative
India’s renewable buildout has created a predictable problem: variability. Solar peaks at midday, demand often peaks later, and wind is seasonal and stochastic. BESS is being positioned as a fast-to-build solution that can smooth supply, firm renewable power, and provide grid services without the land and gestation challenges of many alternatives. The Ministry of Power has issued guidelines on procuring and using BESS across generation, transmission, and distribution, reflecting that storage is no longer seen as a niche add-on.
At a market-architecture level, a key change has been the widening of permissible business models. Regulatory updates have allowed storage to be developed, owned, leased, or operated by consumers, which expands the universe beyond only utilities and generation companies.
In parallel, India has attempted to de-risk scale-up through VGF and related support mechanisms. A widely cited government summary outlines large-scale VGF outlays for BESS and a pathway for accelerated deployment.
This is the backdrop behind the recent spike in “storage news”: storage is being pulled into the mainstream, and the market is trying to discover a workable price and risk-sharing model at speed.
The Tender Boom: Growth Engine, or a Stress Test?
The fastest way to understand what is changing is to look at the structure of recent tenders.
Many state and central tenders have converged around configurations such as 2-hour systems and utilization assumptions like two cycles per day, because these parameters align with peak-shaving, renewable firming, and arbitrage use cases.
At the same time, tenders are experimenting. Industry observers note that 2025 saw innovations including different duration requirements, cycling expectations, grid-forming demands, and assorted “freebies” or scope allocations (land, auxiliary power, evacuation arrangements). This experimentation is positive, but it also creates confusion, because bankability depends on predictable allocation of responsibilities and risks.
Where businesses should be cautious is that tender design can unintentionally reward the wrong behaviour. When bidding becomes a race to the bottom, it can incentivise unrealistic degradation assumptions, thin warranties, and aggressive cost compression in safety-critical equipment.
This is not theoretical. Reports have reported that the record-low bids have raised concerns about long-term viability, quality of batteries deployed, safety outcomes, and the entry of inexperienced developers.
For serious businesses, the question is not “can we win at a low tariff” but “can we deliver performance, safety, and availability for 10 to 15 years under Indian operating conditions and still make acceptable returns.”
The Policy Tailwinds that are Reshaping Project Economics
Several policy signals matter because they directly change cashflows and risk.
1) Viability Gap Funding and Scale Targets
Government communications highlight VGF support for large-scale BESS, with defined outlays and MWh targets. These schemes are intended to close the viability gap and bring down the delivered cost of storage-based services.
From a business perspective, VGF changes two things:
- It can compress required tariffs to a level discoms can accept.
- It can create a competitive rush, where bidders underprice assuming policy support, faster clearances, and perfect execution.
2) Inter-State Transmission System Charge Waivers (for eligible projects)
Transmission charges can materially affect delivered economics. Reports have reported that India is extending a waiver on inter-state transmission charges for eligible energy storage projects until June 2028, tied to commissioning or award conditions.
This helps viable projects become more competitive, but it also adds compliance pressure: missing eligibility dates or conditions can undermine the entire financial model.
3) National Policy Direction
The Draft National Electricity Policy, 2026 signals encouragement for BESS due to low gestation period and land needs, and points to the role of emerging storage technologies.
Draft policies are not final law, but they influence how utilities, regulators, and lenders perceive the direction of travel.
Why Aggressive Bidding is a Red Flag, not a Badge of Victory
If your business is considering bidding, partnering, financing, or supplying into BESS projects, you should treat ultra-low tariffs as a diagnostic prompt.
Here are the common failure modes behind “too good to be true” bids:
1) Degradation Optimism and Augmentation Denial
Battery performance declines with use, temperature, and calendar ageing. Two cycles per day in a 2-hour system is not a benign operating profile. If bidders assume slow degradation without a clear augmentation plan, the project can meet early-year performance but fail in later years, triggering penalties, disputes, and refinancing stress.
2) Warranty Ambiguity
A “10-year warranty” can be structured in ways that shift risk back to the owner: narrow operating envelopes, exclusions for ambient temperature, limited throughput, or complicated claim processes. The contract may look robust until year 6 – 8 when performance drops and the owner learns what is not covered.
3) Safety and Thermal Risk Underestimation
Safety engineering is expensive: cell selection, module design, BMS logic, fire detection, suppression, ventilation, separation distances, and emergency response protocols. When projects are priced too tightly, safety can be where corners are cut. Reports have noted the concerns about low-quality batteries and safety risks, especially in high-temperature regions.
4) Execution Capability Mismatch
A tender win does not equal delivery capability. India’s market is seeing new entrants. Some will build strong teams and succeed; others may rely on thin EPC structures and weak O&M, leading to delayed Commercial Operation Date (COD), performance under-delivery, and claims.
For investors and lenders, the BESS market is therefore entering a “credibility screening” phase. Business owners should expect more scrutiny on vendor bankability, warranty strength, grid integration readiness, and operational track record.
Who is most Exposed, beyond BESS Developers?
BESS affects multiple business categories, often indirectly.
1) Renewable Generators and Hybrid Developers
Storage can convert intermittent generation into dispatchable supply and improve offtake quality. But it also introduces battery lifecycle risk, augmentation obligations, and more complex contracting. Government advisories on co-location of storage with solar reflect the directional push.
2) Discoms and Large Commercial and Industrial Consumers
Discom procurement of BESS is often framed as a grid stability and peak management tool. Some state-level initiatives indicate growing interest in deploying BESS at substations and across networks.
For large consumers, the opportunity is reliability and tariff optimisation. The risk is signing poorly-structured “storage service” contracts that shift technical underperformance to the consumer through availability clauses or pass-through charges.
3) EPCs, Integrators, and OEM Supply Chains
A tender surge can create a short-term volume boom, followed by a quality shakeout. Firms that invest in QA, safety, testing, and documented commissioning will emerge stronger. Firms that chase volume without robust engineering may face reputational and contractual damage.
4) Financiers, Private Equity, and Strategic Investors
BESS is attractive because it is modular and fast to deploy, but it is not a simple infrastructure annuity. The asset behaves more like a “degrading machine” than a static plant. Underwriting must reflect operating regime, augmentation, warranty enforceability, and counterparty risk.
What Businesses should do Now
The right response is not panic. It is disciplined preparation.
Step 1: Decide your Exposure Type
Are you a developer, EPC, supplier, consumer, or investor? Each role has a different “risk owner” position. Your contracts must reflect that reality.
Step 2: Build a Bankable Lifecycle Model
A credible model must include:
- Throughput assumptions aligned to tender requirements (e.g., two cycles per day where specified)
- Degradation curves and augmentation scheduling
- Warranty coverage mapping to operating envelopes
- Penalty regimes and availability commitments
- Clear paths for compliance with policy-linked benefits (e.g., ISTS waiver eligibility timelines)
Step 3: Stress-test the Contract, not just the Tariff
Many BESS failures originate from legal and performance definitions:
- What constitutes “available capacity”
- How capacity is measured (metering point definitions)
- What happens if grid conditions limit charging or dispatch
- Force majeure and change-in-law treatment
- Dispute mechanisms and claim timelines
Step 4: Treat Safety as a First-Order Design Variable
Do not accept “standard containerised solutions” without safety documentation:
- Compliance certificates
- Thermal runaway mitigation approach
- Fire detection and suppression system design
- Emergency response plan aligned to site conditions
- O&M training and spares provisioning
Step 5: Choose Bankable Counterparties and Vendors
In a market where aggressive bids are common, bankability becomes a competitive advantage. Prioritise:
- Track record in comparable operating climates
- Transparent warranty terms
- Credible O&M capability
- Clear augmentation readiness
- Demonstrated commissioning and grid-integration competence
What the BESS Market will likely look like by 2027 – 2028
This section is opinion, based on observable market signals and not a guarantee.
- The market will likely bifurcate into high-quality, lender-friendly platforms and a long tail of weak projects.
The concerns about unviable low bids suggest the market is already testing its limits. - Tender requirements will likely become more standardized and technically gated.
As performance issues surface, procurers will tighten eligibility norms, testing requirements, and warranty standards. - Safety and warranties will become the differentiators, not EPC price alone.
Incidents or underperformance tend to trigger an overcorrection, after which safety engineering and documented compliance become non-negotiable. - Consumers will increasingly buy “storage as a service,” but only from credible operators.
Regulatory openness to consumer participation expands models, but buyers will demand availability certainty and enforceable performance clauses.
How Hmsa can Help
BESS is a sector where strategy, contracts, engineering realities, and financing assumptions collide. Many failures happen because teams treat it as either a pure engineering procurement or a pure financial arbitrage play. It is neither.
As management consultants supporting energy and infrastructure businesses, we typically help in five practical ways:
- Commercial and Risk Structuring
We translate tender clauses, performance definitions, and penalty regimes into a risk allocation framework that management and lenders can sign off. - Bankable DPR and Lifecycle Economics
We develop lender-grade business cases that explicitly model degradation, augmentation, warranty enforceability, and policy-linked incentives (VGF, transmission waivers), so decisions are made on lifecycle truth rather than headline tariffs. - Vendor and Technology Diligence
We support partner selection through structured technical and commercial evaluation, including warranty term benchmarking, safety documentation checks, and O&M readiness. - Bid Strategy and Tender Response Development
We help clients choose where to bid, how to price responsibly, which risks hedging contractually, and how to craft submissions that are compliant, defensible, and execution focused. - Implementation Governance
For awarded projects, we set up execution governance (milestones, acceptance tests, document control, claim management) to reduce COD slippage and post-COD performance disputes.
If your business is exposed to BESS, the most valuable step is not to chase the next tender headline. It is to build a position that survives scrutiny: technically safe, contractually protected, and financially credible over the full operating life of the asset.
Reference: The Economic Times
