India BESS tariffs hit 2025 lows, viability risks rise

What the IEEFA-JMK report is warning about

India’s standalone battery energy storage system (BESS) market is expanding quickly, but a joint research report by the Institute for Energy Economics and Financial Analysis (IEEFA) and JMK Research and Analytics warns the pace may be harder to sustain. The report flags tariff viability concerns, financing hurdles and execution risks as key threats to the next phase of deployment. The concern is not only about whether projects can be awarded at record-low tariffs, but also whether they can be financed, built and operated at the promised price points. Analysts and industry voices cited in the broader discussion say the margin for error is thin at current tariff levels. And that tightness could show up later in project timelines, quality and financial closure.

Standalone BESS tariffs fell sharply in 2025

A central finding is the steep decline in discovered tariffs for two-hour standalone BESS projects during 2025. The report highlights that the lowest discovered tariff fell to ₹1.48 lakh per MW per month for two-hour systems. It contrasts that with a benchmark tariff estimate of ₹2.3 lakh/MW/month, which it considers necessary for financially sustainable operations. In dollar terms, the same comparison is presented as $1,576.00/MW/month versus an indicative benchmark of $1,448.95/MW/month. The gap between market-discovered prices and estimated costs is a recurring theme in the report’s assessment of project risk.

Why nearly 75% of allocated capacity is labelled “at-risk”

The report estimates that nearly 75% of allocated two-hour BESS capacity falls into an “at-risk” category. The stated reason is the widening difference between bid tariffs and the economics implied by estimated project costs. The risk label is not framed as a definitive failure outcome, but as a warning signal that financing and execution could become difficult at ultra-low tariffs. The report also links the situation to aggressive bidding in recent auctions, which may undermine project viability even as headline tender volumes rise. It adds that cost pressure at lower tariffs could affect asset quality, because developers may be forced to operate with limited buffers.

Viable outcomes concentrated in a handful of state auctions

According to the report, financially viable outcomes have largely been limited to smaller and early-stage state-led auctions. It specifically names Karnataka, Tamil Nadu, Telangana and Gujarat as states where such outcomes have been seen. This is important because it implies that the most price-competitive, large-scale tenders may not be the only benchmark investors and policymakers should use. The report’s framing suggests that procurement design, bidder quality and payment security can matter as much as the tariff number itself. In the current cycle, the market is seeing a large volume of awarded capacity, but execution confidence appears uneven.

Financing, procurement and commissioning risks could push timelines

The report warns that financing conditions remain stringent for standalone BESS projects, especially amid declining tariffs and rising battery input costs. It states that developers could face delays in financial closure, procurement and commissioning. Those bottlenecks could lead to implementation delays of up to 18 months, according to the report. Separately, the market narrative around 2026 is that it will test whether projects can be built, financed and operated within promised timelines of 18 to 24 months. The emphasis across the material is consistent: the next phase is less about awarding tenders and more about delivering assets.

Tender volumes surged, but execution is still early-stage

The sector has seen a sharp jump in tendering activity alongside relatively limited operational capacity. The text notes that in 2025 alone, around 102 GWh of tenders were issued, while operational capacity remains at an early stage. Another data point says that 69 tenders totaling 102 GWh were issued in 2025, almost matching all tenders issued between 2018 and 2024 combined. Yet, until 2025, India has commissioned 708 MWh of battery energy storage capacity, underscoring the gap between announcements and on-ground execution. A separate statement in the material adds that only 500 MWh of systems are currently operational, while several projects have been cancelled or remain stuck in early stages.

What industry and research notes say about economics at low tariffs

Alongside the IEEFA-JMK findings, the material cites broader industry research and views on tariff compression. Mercom India Research, in its report titled LCOS and Bidding Trends in Indian Energy Storage Projects, said that between July and November 2025, 24 GWh of storage tenders were issued, while 25.6 GWh of projects were auctioned. That report also found that only 50% of the standalone BESS projects analyzed showed positive project economics under modeled assumptions. Another view highlighted is that at current tariff levels, coverage of the levelized cost of storage (LCOS) is “tight” and generally viable only under strict cost control and conservative operating assumptions, with modest increases in input costs potentially impacting returns.

Supply chain dependence and China-linked uncertainty

The report and the wider discussion also highlight supply chain dependence as a risk factor. China’s tightening trade policies and export restrictions on battery materials, combined with stagnation in battery cost declines, are cited as factors that could challenge assumptions behind ultra-low tariffs. The material notes that how battery prices move next will influence whether many projects remain viable. This is positioned as a practical execution risk because even well-structured tenders can struggle if procurement assumptions change materially after bidding. In this context, tariff realism and procurement discipline become linked to both delivery timelines and long-term performance.

Policy support is growing, but procurement design remains key

The material points to policy support measures intended to accelerate deployment and improve economics. It mentions a second tranche of Viability Gap Funding (VGF) worth ₹5,400 crore for 30 GWh of standalone BESS, along with a 20% domestic value addition requirement. It also notes that interstate transmission system (ISTS) charge waivers for pumped storage and solar-plus-BESS projects have been extended until 2028. At the same time, industry experts quoted in the discussion believe procurement reforms may be required, including cost-reflective tariff floors, stricter bidder eligibility norms and stronger payment security mechanisms to reduce execution risks.

Key figures at a glance

Market impact and why it matters

For investors and developers, the immediate market impact is a higher bar for diligence on project economics and execution capability. Low tariffs can expand headline adoption, but the report suggests they also increase the likelihood of delays and financing bottlenecks, especially for projects without strong payment security or realistic cost assumptions. For policymakers and procurers, the issue is whether tender outcomes are translating into bankable, buildable projects at scale. The material also links tariff pressure to potential asset quality compromises, a risk that can surface later through performance and degradation outcomes. With only a limited base of operational capacity relative to the tender pipeline, the next stage of commissioning will become an important validation point.

Conclusion

The IEEFA-JMK report frames India’s standalone BESS market as fast-growing but increasingly exposed to tariff viability and execution risks. With the lowest 2025 two-hour tariffs falling to ₹1.48 lakh/MW/month and nearly 75% of allocated capacity labelled “at-risk,” the focus is shifting from aggressive tendering to delivery discipline. Policy support such as ₹5,400 crore of VGF for 30 GWh and extended ISTS waivers adds momentum, but the report and industry voices still point to procurement reforms and stronger payment security as key levers. The next test will be whether awarded projects achieve financial closure and commissioning within the 18 to 24 month windows being discussed, without eroding long-term asset performance.