Adoption of grid-scale energy storage systems for enhancing grid stability, defer capacity upgrades and improving resource adequacy.
A stable and efficient power grid is no longer just a technical requirement, but it has now become a strategic necessity. Historically, India’s transmission and distribution (T&D) losses account for 20%[i] of its power generation, which is relatively high compared to other major global economies. The Government of India (GoI) has charted a course towards integration of grid-scale energy storage systems (ESS) in the T&D infrastructure across India to ensure backup, reduce congestion and optimize the use of variable renewable energy (VREs), which is estimated to rise from the current 200GW to 500GW capacity by 2030[ii].
ESS not just benefits the grid infrastructure utilities and distribution companies in achieving grid expansion and improving power quality, but also supports bulk end-use consumers like heavy industries and data centers, that rely on stable power supply to avoid power outages that can severely damage machinery/ hardware and disrupt operations.
Afterall India is emerging as a preferred data center hub due to host of other positive factors, including its development-focused foreign policies, geographical location, cross-border connectivity (through sub-sea cables), lower capital and operating cost, amongst other enablers.
While the global battery industry is witnessing rapid advancements in several forms of ESS(s) technologies, Pumped Hydro Storage (PHS) and Battery Energy Storage System (BESS) are most widely adopted solutions for large-scale grid storage, particularly for stabilizing VRE power.
As of 2024, the United States had deployed over 26 gigawatts (GW)[iii] of utility-scale ESS with an additional 18.2 GW of grid ESS[iv] expected to be installed in 2025, potentially backing up nuclear reactor output for a few hours, according to U.S Energy Information Administration.
Parallelly, GoI has introduced targeted incentives and supportive policy reforms to promote ESS in India, including Viability Gap Funding (VGF), waiver of ISTS in some cases, energy storage obligations for DICOMS and a handful of policies pushing electric vehicles (EVs)[v] forward. Further, India’s Production Linked Incentive (PLI) scheme, the National Programme on Advanced Chemistry Cell (ACC) Battery Storage, endeavours to promote domestic production of Advanced Chemistry Cell (ACC) batteries.
Ministry of Power (MoP) has encouraged RE implementation agencies and state utilities to incorporate a minimum two-hour co-located ESS equivalent to 10% of the capacity[vi]; In addition, the recent shift in the deviation settlement mechanism (DSM) regime has encouraged RE developers to consider integrating suitable ESS along with their VRE projects.
We are witnessing a range of implementation and structuring models being adopted by developers for their ESS projects, such as utilizing energy storage for energy arbitrage (by capitalizing on the price differences between peak and non-peak hours) and offering round-the-clock bilateral (steady) supply of captive power.
Reflecting on the industry momentum, we are seeing the rise of lithium-ion cell manufacturing facilities[vii] and implementation of ESS at major cities like Mumbai which will get its own 100 MW BESS project in the next two years[viii]. Karnataka is also setting up 500MW/ 1000 MWh grid-connected standalone BESS to manage peak power demand[ix].
To further accelerate adoption of ESS in the Indian grid system, supportive policies at both central and state level will be vital, particularly enabling industries to avail ESS on standalone basis as end-use consumers. Large scale manufacturers, pursuing net-zero emissions goal, are exploring combinations of both VRE power and ESS backup from different developers, to meet their energy requirements.
India is poised for a rapid surge in battery usage, with its lithium-ion battery industry expected to grow at a CAGR of 22.72% between 2025 and 2030[x].
The lack of critical resources should encourage Indian lawmakers to promote a ‘circular economy’ through refurbishing, recycling and reuse[xi]. As India accelerates towards deployment of BESS solutions and using lithium-ion batteries in EVs, the policy landscape will have to evolve to encourage R&D towards effective battery waste management. A key focus will be to foster India’s self-sufficiency by ensuring that critical minerals such as lithium, cobalt and nickel in the form of ‘black mass’ (a valuable material recovered after dismantling and shredding batteries), is not exported for further extraction and re-use for manufacturing of new batteries.
Endnotes
[i][i] “Economic Survey flags high T&D losses in the power sector” January 29, 2021: https://economictimes.indiatimes.com/industry/energy/power/economic-survey-flags-high-td-losses-in-power-sector/articleshow/80585965.cms?from=mdr
[ii] “Ministry of Power announcement November 13, 2024”: https://pib.gov.in/PressReleaseIframePage.aspx?PRID=2073038&utm
[iii] In-brief analysis- U.S. battery capacity increased 66% in 2024, March 12, 2025 https://www.eia.gov/todayinenergy/detail.php?id=64705
[iv] “Solar And Battery Storage To Account For 81% Of 63 GW U.S. Power Capacity Additions In 2025” February 25, 2025 :https://solarquarter.com/2025/02/25/solar-and-battery-storage-to-account-for-81-of-63-gw-u-s-power-capacity-additions-in-2025/
[v] “Mobility Solutions get a boost by MoP for PIB March 7, 2019”- https://pib.gov.in/PressReleaseIframePage.aspx?PRID=1567807
[vi]Central Electricity Authority notification dated February 18, 2025: //efaidnbmnnnibpcajpcglclefindmkaj/https://cea.nic.in/wpcontent/uploads/notification/2025/02/Advisory_on_colocating_Energy_Storage_System_with_Solar_Power_Projects_to_enhance_grid_stability_and_cost_efficiency.pdf
[vii] India Lithium-ion Battery Market Source: https://www.mordorintelligence.com/industry-reports/india-lithium-ion-battery-market
[viii]“Tata Power gets nod to install 100-Mw battery energy storage project in Mumbai” April 7, 2025- https://energy.economictimes.indiatimes.com/news/power/tata-power-gets-nod-to-install-100-mw-battery-energy-storage-project-in-mumbai/120059113?utm_source=top_news&u
[ix]“Saral, Oriana and Pace win KPTCL’s 1GWh Standalone BESS Auction, April 3, 2025”: https://www.mercomindia.com/sarala-oriana-pace-win-kptcls-1-gwh-bess-auctionq
[x] India Lithium-ion Battery Market Source- https://www.mordorintelligence.com/industry-reports/india-lithium-ion-battery-market
[xi] Battery Recycling in India- https://www.linkedin.com/pulse/battery-recycling-india-aarushi-sharma-bnoec
Authored by Nakul Vohra, Associate Partner, Dentons Link Legal, and Antra Shourya, Associate, Dentons Link Legal.
Disclaimer: The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.