Rising battery costs seen pushing up India storage tariffs as developers warn on project viability

Battery storage tariffs in India are expected to rise as escalating input costs make ultra-low-priced projects increasingly difficult to sustain, developers and lenders said on Wednesday, warning that the sector may need a tariff reset to ensure long-term viability.

India is rapidly expanding battery energy storage systems to support round-the-clock renewable power, with around 260 gigawatt-hours (GWh) of projects currently at various stages of development. But the sharp rise in battery prices is threatening the economics of projects awarded at aggressively low tariffs over the past two years.

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"Tariffs for standalone battery storage projects fell sharply over the last two years on expectations that battery cell costs would continue to decline," said Debamalya Sen, president of the India Energy Storage Alliance (IESA), at an industry event in New Delhi.

"With costs now rising, the question is how many of those projects will survive," he said.

According to IESA, installed battery storage capacity surged more than eleven-fold to 8.7 GWh in the first half of 2026 from 0.78 GWh at the end of 2025 and is expected to reach 10 GWh by the end of the year.

Even so, battery storage capacity remains a fraction of India's roughly 283 GW renewable energy generation capacity, highlighting the scale of expansion still required.

Industry executives attributed the recent increase in battery costs to the withdrawal of export incentives by China — the world's largest battery supplier — as well as higher prices of lithium, copper and aluminium following the Iran conflict.

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India's largest lender, State Bank of India, said some battery storage projects that had already secured financing were now struggling to move forward because suppliers were no longer willing to honour earlier pricing commitments.

"In 2025, we saw the lowest (tariff) quote at 148,000 rupees ($1,548.85) per megawatt per month. At current battery prices, that is not sustainable," said Asesh Chakrabarti, deputy general manager at State Bank of India, during a panel discussion.

Developers have increasingly bid aggressively to secure state government contracts, driving tariffs to record lows.

However, Mahindra Susten, the clean energy arm of the Mahindra Group, cautioned against a prolonged price war that could undermine project execution.

"Tariffs ... have to be realistic to ensure projects can secure financing, are built on time and to the required quality standards, and remain viable throughout their useful life," said Mahindra Susten Chief Executive Officer Avinash Rao.