Policy Update
Purbaa Jagannath
Background
India’s power system is adding clean generation faster than it can store it. Installed generation capacity stood at 520.5 GW on 31 January 2026. The Central Electricity Authority (CEA) projects 1,121 GW by 2035-36, with non-fossil sources rising to about 70% of capacity from about 52% today (CEA, 2026). Solar output peaks at midday while demand peaks after sunset, so storage is what turns variable renewable energy into firm, round-the-clock supply.
The Ministry of Power’s National Framework for Promoting Energy Storage Systems (August 2023) is the base document. Its stated aims are a constant supply of renewable energy, lower emissions, lower energy costs, better grid stability, innovation in storage technologies, and equitable access to storage (Ministry of Power, 2023). It covers both battery storage and pumped storage.
The programme serves three overlapping goals:
- Grid reliability: shifting solar energy into non-solar hours and providing ancillary services.
- Climate commitments: supporting India’s non-fossil capacity and net-zero ambitions.
- Industrial policy: building domestic battery manufacturing to cut import dependence.
Functioning
The programme works through several levers rather than one rigid mandate.
- Demand-side obligation. The Energy Storage Obligation (ESO), notified on 22 July 2022, requires a share of energy consumed to come from solar or wind with storage. The share rises from 1% in 2023-24 to 4% by 2029-30. It counts as fulfilled only when at least 85% of the energy stored comes from renewable sources (Energy-Storage.News, 2022).
- Capital support (VGF). The first scheme was approved by the Cabinet on 6 September 2023. It envisaged 4,000 MWh of battery storage by 2030-31, with support of up to 40% of capital cost and an initial outlay of ₹9,400 crore, including budgetary support of ₹3,760 crore (PIB, 2023a). As battery prices fell, capacity under the same ₹3,760 crore was raised to 13,200 MWh. Payments are staged: 10% at financial closure, 45% at commercial operation, and 15% a year for three years after (PIB, 2025). In June 2025 the Ministry of Power approved a second tranche. It provides ₹5,400 crore from the Power System Development Fund for 30 GWh, at ₹18 lakh per MWh, with 25 GWh for 15 states and 5 GWh for NTPC (CEA, n.d.; pv magazine, 2025). Together the two tranches support about 43,850 MWh (CEA, n.d.).
- Offtake priority. At least 85% of the power from VGF-funded battery projects must first be offered to distribution companies (PIB, 2023b).
- Transmission relief. Inter-State Transmission System (ISTS) charges are fully waived for pumped storage projects awarded by 30 June 2028 and for co-located battery projects commissioned by that date, if the power is consumed outside the host state (TeamLease RegTech, 2025).
- Market access. The Framework gives independent storage a legal status, allows technology-agnostic bidding for long- and short-duration storage, and encourages pilots for newer technologies such as compressed air, flywheel, gravity and thermal storage (Energy Storage News, 2023; Ministry of Power, 2023).
- Manufacturing. The ₹18,100 crore ACC incentive scheme targets 50 GWh of domestic cell capacity. Ola Electric, Reliance New Energy, Hyundai Global and Rajesh Exports were selected (PIB, 2022).
Table 1: Core Instruments of the Programme
| Instrument | Year | Lead agency | Key feature |
| Energy Storage Obligation | 2022 | Ministry of Power | 1% (2023-24) rising to 4% (2029-30) |
| National Framework for ESS | 2023 | Ministry of Power | Legal status for storage, bidding guidelines, pilots |
| VGF Tranche I | 2023 | Ministry of Power / CEA | ₹3,760 crore; about 13.2 GWh |
| VGF Tranche II | 2025 | Ministry of Power (PSDF) | ₹5,400 crore; 30 GWh |
| ISTS waiver | 2025 | Ministry of Power | 100% for pumped storage and co-located BESS up to June 2028 |
| ACC incentive scheme | 2021-22 | Ministry of Heavy Industries | ₹18,100 crore; 50 GWh of cells |
Source: Energy-Storage.News (2022); Ministry of Power (2023); PIB (2022, 2023a, 2025); pv magazine (2025); TeamLease RegTech (2025).
Macro-Level Policy Integration
Alignment with national planning. The storage requirement is built into the National Electricity Plan (NEP) 2023 and CEA’s resource adequacy planning.
Table 2: Projected Storage Requirement
| Year | Total | Pumped storage | Battery storage |
| 2026-27 | 16.13 GW / 82.37 GWh | 7.45 GW / 47.65 GWh | 8.68 GW / 34.72 GWh |
| 2031-32 | 73.93 GW / 411.4 GWh | 26.69 GW / 175.18 GWh | 47.24 GW / 236.22 GWh |
| 2035-36 | 174 GW / 888 GWh | 94 GW / 567 GWh | 80 GW / 321 GWh |
Source: National Electricity Plan 2023 figures as reported in Energetica India (2026a); CEA (2026).
Draft National Electricity Policy 2026. The draft proposes market-based battery deployment, domestic manufacturing of storage components, and VGF-type support for battery and pumped storage. It also lets distribution companies install storage on behalf of small consumers (Energetica India, 2026b).
State-level action. Rajasthan targets 10 GWh of storage by 2028-29. Andhra Pradesh plans 25 GWh of battery storage and 22 GWh of pumped storage by 2029 (Power Peak Digest, 2026). In Tranche II, Maharashtra, Rajasthan and Gujarat each received 4 GWh of VGF-backed capacity (pv magazine, 2025).
Performance
Storage has moved from pilots to industrial-scale procurement within about three years. Cost, tendering and commissioning figures all reflect this, though a large execution gap remains.
Table 3: Falling Cost of Storage and Support
| Indicator | Earlier | Latest |
| Discovered cost of storage (two cycles a day) | ₹10.18/kWh (2022-23 bids) | About ₹2.1/kWh in recent tenders, without VGF |
| VGF per MWh | ₹96 lakh (initial estimate) | ₹46 lakh (revised, Tranche I), then ₹18 lakh (2025) |
Source: Energy Storage / ESS News (2025); JMK Research & Analytics (2025).
Table 4: Progress Snapshot (2026)
| Indicator | Status |
| Commissioned storage (June 2026) | About 10.3 GW: pumped hydro 7.4 GW / 36 GWh; battery 2.9 GW / 8.3 GWh |
| Operational battery capacity | About 0.8 GWh (Dec 2025) to 8.5 GWh (H1 2026) |
| Storage tendered since 2018 | 281 GWh: 105 under execution, 110 under tendering, 53 cancelled |
| Battery capacity expected by end-2026 | 12-15 GWh |
| ACC cell capacity commissioned on time | 1.4 GWh of the 50 GWh target (October 2025) |
Source: IEEFA & JMK Research (2026); Power Peak Digest (2026), reporting the IESA India BESS Market Review H1 2026; Down To Earth (2026); IEEFA (2025b).
Implementation Outcomes
A. Battery Storage Deployment. Operational battery capacity grew roughly eleven-fold in a year. Of the 8.5 GWh operating by mid-2026, 6.9 GWh runs in merchant mode (Power Peak Digest, 2026).
Takeaway: Storage is starting to earn revenue from markets rather than only from government-backed contracts.
B. Pumped Storage. Pumped hydro still holds most of India’s storage by energy (36 GWh of about 44 GWh commissioned) (IEEFA & JMK Research, 2026). About 10 GW across eight projects was under implementation in mid-2025 (TND India, 2025).
Takeaway: Long-duration storage is still dominated by pumped hydro, and battery additions are catching up fast.
C. Tendering Pipeline. India has tendered 281 GWh of storage, but 53 GWh has been cancelled (Down To Earth, 2026).
Takeaway: Tendering is running well ahead of delivery.
D. Domestic Manufacturing. Only 1.4 GWh of the 50 GWh ACC target was commissioned on time (IEEFA, 2025b). The Ministry of Heavy Industries has since reportedly extended timelines to 2031 for Ola Electric and Reliance New Energy (Whalesbook, 2026).
Takeaway: Storage deployment is outpacing the domestic cell industry meant to supply it.
Impact
Grid and Renewable Integration. Battery storage stores excess daytime solar power and discharges it in the evening peak, which supports larger renewable additions (Energetica India, 2026a). Offtake priority for distribution companies passes these benefits to consumers.
Economic and Investment. The ₹5,400 crore Tranche II is expected to attract about ₹33,000 crore of investment by 2028 (TND India, 2025). Falling battery costs also lower the cost of balancing the grid.
Industrial Transformation. The ACC scheme and Draft NEP 2026 aim to move India from importing cells to making them. Delivery is still limited (IEEFA, 2025b).
Regional Spread. Capacity is concentrated in Rajasthan, Gujarat and Maharashtra, which received the largest VGF allocations (pv magazine, 2025).
Sustainability Linkage. The outcomes feed into SDG 7 (Affordable and Clean Energy), SDG 9 (Industry, Innovation and Infrastructure) and SDG 13 (Climate Action).
Challenges
The execution gap. Between 2022 and May 2025, India auctioned about 12.8 GWh of battery capacity, but only about 219 MWh was operational. SECI’s 500 MW/1,000 MWh tender was cancelled in January 2025 over delays in signing agreements. Industry estimates suggest 40-55 GW of renewable capacity faced delays in securing power purchase agreements (IEEFA, 2025a).
Manufacturing lag. Cell-manufacturing progress has been uncertain despite incentives (Energy Storage / ESS News, 2025). Penalty notices have been issued for missed milestones (Whalesbook, 2025).
Financing. The IESA market review identifies financing as the biggest hurdle to scaling (Down To Earth, 2026).
Policy cliff. The ISTS waiver for co-located battery projects ends with commissioning after 30 June 2028 (TeamLease RegTech, 2025). For non-co-located projects, it phases down in 25% annual steps (Energy Storage / ESS News, 2025).
Duration mismatch. CEA assigns a four-hour battery a capacity credit of about 0.67, against up to 0.95 for pumped storage (CEA, 2026). Short-duration batteries cannot replace long-duration storage for reliability.
Data inconsistency. Operational capacity estimates differ by tracker and cut-off date: 5.9 GWh at March 2026 (Mercom, via ESS News, 2026) against 8.3-8.5 GWh at June 2026. This makes progress harder to verify.
Way Forward
Close the execution gap. Standard agreement timelines and faster signing of power purchase and battery storage agreements would convert tendered capacity into operating capacity. Penalties for bid cancellations and delays would discourage speculative bidding.
Plan for the ISTS waiver cliff. A graded taper beyond June 2028 would avoid a rush to commission followed by a stall.
Protect long-duration storage. Pumped storage and newer long-duration technologies need the same attention as batteries, using the Framework’s technology-agnostic bidding and pilot provisions.
Strengthen domestic manufacturing. Realistic ACC milestones, enforceable penalties and demand certainty from VGF-backed projects would help align cell supply with storage demand.
Improve data transparency. A single public dashboard using common definitions would let independent observers track capacity from tender to commissioning.
Align states and distribution companies. State storage policies should align with national targets, and distribution-company offtake plans should be tied to the Resource Adequacy framework.
Finalise the Draft NEP 2026. Its storage provisions would give the programme a clearer long-term policy anchor.
India’s storage push has moved from a framework to a funded, tendered and increasingly commercial market. Its success now depends less on announcing capacity than on delivering it, with long-duration storage, domestic manufacturing and grid readiness advancing together.
References
Central Electricity Authority. (n.d.). Battery Energy Storage System (BESS): About us. [https://intranet.cea.gov.in/bess/about](https://intranet.cea.gov.in/bess/about)
Central Electricity Authority. (2026). Long-term national resource adequacy plan 2026–27 to 2035–36. [https://cea.nic.in/wp-content/uploads/notification/2026/04/Long_term_National_Resource_Adeqaucy_Plan2026_27_to_2035_36.pdf](https://cea.nic.in/wp-content/uploads/notification/2026/04/Long_term_National_Resource_Adeqaucy_Plan2026_27_to_2035_36.pdf)
Down To Earth. (2026). India’s battery storage requirement to surge 888-fold by 2035–36, but financing remains the biggest hurdle. [https://www.downtoearth.org.in/energy/indias-battery-storage-requirement-to-surge-888-fold-by-2035-36-but-financing-remains-the-biggest-hurdle](https://www.downtoearth.org.in/energy/indias-battery-storage-requirement-to-surge-888-fold-by-2035-36-but-financing-remains-the-biggest-hurdle)
Energetica India. (n.d.). Unlocking value from battery energy storage systems. [https://www.energetica-india.net/articles/unlocking-value-from-battery-energy-storage-systems](https://www.energetica-india.net/articles/unlocking-value-from-battery-energy-storage-systems)
Energetica India. (2026). Draft NEP 2026 pushes RE, storage and grid reforms, targets 4,000 kWh per capita power use by 2047. [https://www.energetica-india.net/news/draft-nep-2026-pushes-re-storage-and-grid-reforms-targets-4000-kwh-per-capita-power-use-by-2047](https://www.energetica-india.net/news/draft-nep-2026-pushes-re-storage-and-grid-reforms-targets-4000-kwh-per-capita-power-use-by-2047)
Energy-Storage.News. (2025, December 15). India sees dramatic plunge in battery storage costs, Ministry reports. [https://www.ess-news.com/2025/12/15/india-sees-dramatic-plunge-in-battery-storage-costs-ministry-reports/](https://www.ess-news.com/2025/12/15/india-sees-dramatic-plunge-in-battery-storage-costs-ministry-reports/)
ETN News. (n.d.). India notifies national framework for promoting energy storage. [https://etn.news/buzz/india-notifies-national-framework-for-promoting-energy-storage](https://etn.news/buzz/india-notifies-national-framework-for-promoting-energy-storage)
Energy Storage News. (n.d.). India adds energy storage obligation policy to renewable energy purchase scheme. [https://www.energy-storage.news/india-adds-energy-storage-obligation-policy-to-renewable-energy-purchase-scheme/](https://www.energy-storage.news/india-adds-energy-storage-obligation-policy-to-renewable-energy-purchase-scheme/)
Institute for Energy Economics and Financial Analysis. (n.d.). India’s battery storage boom: Getting the execution right. [https://ieefa.org/resources/indias-battery-storage-boom-getting-execution-right](https://ieefa.org/resources/indias-battery-storage-boom-getting-execution-right)
Institute for Energy Economics and Financial Analysis. (n.d.). Assessing India’s incentive scheme to enhance the battery manufacturing ecosystem. [https://ieefa.org/resources/assessing-indias-incentive-scheme-enhance-battery-manufacturing-ecosystem](https://ieefa.org/resources/assessing-indias-incentive-scheme-enhance-battery-manufacturing-ecosystem)
Institute for Energy Economics and Financial Analysis. (2026). Energy storage sector: June 2026 \[Report\]. [https://ieefa.org/sites/default/files/2026-08/ESSjmk-0626.pdf](https://ieefa.org/sites/default/files/2026-08/ESSjmk-0626.pdf)
JMK Research & Analytics. (n.d.). VGF scheme expands to support 30 GWh of new standalone BESS development in India. [https://jmkresearch.com/vgf-scheme-expands-to-support-30-gwh-of-new-standalone-bess-development-in-india/](https://jmkresearch.com/vgf-scheme-expands-to-support-30-gwh-of-new-standalone-bess-development-in-india/)
Ministry of Power. (2023). National framework for promoting energy storage systems. Government of India. [https://powermin.gov.in/sites/default/files/webform/notices/National_Framework_for_promoting_Energy_Storage_Systems_August_2023.pdf](https://powermin.gov.in/sites/default/files/webform/notices/National_Framework_for_promoting_Energy_Storage_Systems_August_2023.pdf)
Ministry of Power. (n.d.). Press release (PRID 1809037). Press Information Bureau, Government of India. [https://www.pib.gov.in/PressReleasePage.aspx?PRID=1809037®=3&lang=2](https://www.pib.gov.in/PressReleasePage.aspx?PRID=1809037®=3&lang=2)
Ministry of Power. (n.d.). Press release (PRID 1955112). Press Information Bureau, Government of India. [https://www.pib.gov.in/PressReleasePage.aspx?PRID=1955112®=3&lang=2](https://www.pib.gov.in/PressReleasePage.aspx?PRID=1955112®=3&lang=2)
Press Information Bureau. (n.d.). Press release (PRID 1989805). Government of India. [https://www.pib.gov.in/PressReleaseIframePage.aspx?PRID=1989805](https://www.pib.gov.in/PressReleaseIframePage.aspx?PRID=1989805)
Press Information Bureau. (n.d.). Press release (PRID 2118325). Government of India. [https://www.pib.gov.in/PressReleaseIframePage.aspx?PRID=2118325](https://www.pib.gov.in/PressReleaseIframePage.aspx?PRID=2118325)
PV Magazine. (2025, June 11). India offers $631.5 million to support 30 GWh of battery storage. [https://www.pv-magazine.com/2025/06/11/india-offers-631-5-million-to-support-30-gwh-of-battery-storage/](https://www.pv-magazine.com/2025/06/11/india-offers-631-5-million-to-support-30-gwh-of-battery-storage/)
TeamLease RegTech. (n.d.). Ministry of Power announces ISTS charge waiver for energy storage systems. [https://www.teamleaseregtech.com/updates/article/45760/ministry-of-power-announces-ists-charge-waiver-for-energy-storage-syst/](https://www.teamleaseregtech.com/updates/article/45760/ministry-of-power-announces-ists-charge-waiver-for-energy-storage-syst/)
T&D India. (n.d.). ISTS waiver for energy storage projects extended till June 2028. [https://www.tndindia.com/ists-waiver-for-energy-storage-projects-extended-till-june-2028/](https://www.tndindia.com/ists-waiver-for-energy-storage-projects-extended-till-june-2028/)
Whalesbook. (2025). Ola Electric, Reliance New Energy, Rajesh Exports face penalties for ACC-PLI scheme delays. [https://www.whalesbook.com/news/English/industrial-goodsservices/Ola-Electric-Reliance-New-Energy-Rajesh-Exports-Face-Penalties-for-ACC-PLI-Scheme-Delays/691ded699de501abf62e230d](https://www.whalesbook.com/news/English/industrial-goodsservices/Ola-Electric-Reliance-New-Energy-Rajesh-Exports-Face-Penalties-for-ACC-PLI-Scheme-Delays/691ded699de501abf62e230d)
Whalesbook. (2026). Govt extends ACC battery PLI timeline to 2031; Ola, Reliance get relief. [https://www.whalesbook.com/news/English/auto/Govt-Extends-ACC-Battery-PLI-Timeline-to-2031-Ola-Reliance-Get-Relief/6a856f1c84d2dd5c12db45cd](https://www.whalesbook.com/news/English/auto/Govt-Extends-ACC-Battery-PLI-Timeline-to-2031-Ola-Reliance-Get-Relief/6a856f1c84d2dd5c12db45cd)
Energy Storage News. (2026, June 17). India adds 4.6 GWh battery storage capacity in Q1. [https://www.ess-news.com/2026/06/17/india-adds-4-6-gwh-battery-storage-capacity-in-q1/](https://www.ess-news.com/2026/06/17/india-adds-4-6-gwh-battery-storage-capacity-in-q1/)
About the Contributor
Purbaa Jagannath is a Research Intern at the Impact and Policy Research Institute (IMPRI), working on policy writing. She is currently pursuing a Master’s in Social Work (Women-Centred Practice) at TISS Mumbai, and holds a Bachelor of Social Work (Honours with Research), with a minor in Political Science, from University of Delhi. Her research interests span social work, political science, policy research and grassroots fieldwork across India, with recurring focus areas including youth empowerment, governance and community development.
Acknowledgement
I am writing to express my sincere gratitude to IMPRI (Impact and Policy Research Institute) for providing me with the opportunity to prepare this policy update article and for fostering a rigorous learning environment that connects research with public policy practice. I would also like to thank Sneha Kohli and Divya Natarajan for their valuable reviews.
Disclaimer
The views and opinions expressed in this article are solely those of the author and do not necessarily reflect the views, policies, or positions of IMPRI (Impact and Policy Research Institute) or any other affiliated organisation.
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