Why India’s C&I sector is slow to embrace battery storage

India’s energy transition is entering a decisive phase. The country has already crossed 50% installed power capacity from non-fossil fuel sources, well ahead of its 2030 target, and aims to achieve 500 GW of non-fossil fuel capacity by the end of this decade.

However, as renewable energy generation grows rapidly, ensuring round-the-clock availability of clean power has become the next major challenge. This is where battery energy storage systems (BESS) have emerged as a critical technology.

For India’s commercial and industrial (C&I) sector – which accounts for nearly 42–45% of the country’s total electricity consumption – BESS offers the promise of reducing electricity costs, improving power reliability, maximizing renewable energy utilization, and minimizing dependence on diesel generators. Yet despite these advantages, adoption across industries remains slower than expected.

Cost barriers

The most immediate challenge for businesses is the high upfront investment required for battery storage. While lithium-ion battery prices have declined by nearly 90% globally since 2010, according to the International Energy Agency (IEA), battery systems still represent a significant capital expense. Depending on the size and configuration, a BESS installation can account for 30% to 50% of the total project cost for a renewable energy system.

Unlike rooftop solar, where businesses are familiar with payback periods of around three to five years, battery storage economics vary considerably from one facility to another. For many manufacturing units and SMEs, capital is often prioritized for production expansion or operational upgrades rather than energy infrastructure, making battery investments a difficult boardroom decision.

One of the key reasons for slower adoption is that battery storage does not offer identical benefits to every commercial consumer. Industries operating multiple shifts or during evening hours generally realize greater value because stored energy can be discharged during expensive peak tariff periods. Facilities facing frequent power interruptions can also significantly reduce their reliance on diesel generators, resulting in both operational savings and lower carbon emissions.

However, businesses operating primarily during daytime hours may already consume most of their rooftop solar generation directly, reducing the incremental financial benefit of adding batteries. This makes accurate financial assessment critical. Detailed energy audits are often required to evaluate savings from demand charge reduction, Time-of-day tariff optimization, backup power replacement, and renewable energy shifting. Without such analysis, many organizations remain uncertain about the expected return on investment.

Financing models

India’s rooftop solar market has benefited immensely from innovative financing mechanisms such as RESCO models, power purchase agreements (PPAs), and opex structures that eliminated the need for large upfront investments. Battery storage, however, has not yet reached that stage of financial maturity.

Financial institutions continue to view battery storage as a relatively new asset class with limited operational history, leading to cautious lending practices, higher interest rates, and shorter repayment periods. Although newer concepts such as storage-as-a-service and battery-as-a-service are beginning to emerge, they are yet to achieve widespread adoption. Expanding access to affordable financing will play a crucial role in accelerating deployment across the C&I sector.

The government of India has taken several important steps to encourage energy storage deployment. The announcement of a INR 37.6 billion ($393 million) Viability Gap Funding (VGF) scheme for 4,000 MWh of battery storage projects, the 50 GWh Advanced Chemistry Cell (ACC) Production Linked Incentive (PLI) scheme, and the introduction of Energy Storage Obligations demonstrate strong policy intent.

However, much of the current policy focus has been directed toward utility-scale storage. Commercial and industrial consumers continue to seek greater clarity around distributed storage regulations, open access integration, ancillary service participation, and long-term revenue opportunities. A more predictable regulatory environment will encourage businesses to make long-term investments with greater confidence.

Many businesses continue to associate battery systems solely with power backup. In reality, modern Battery Energy Storage Systems serve a much broader role in energy management. They enable peak demand reduction, optimize Time-of-Day electricity tariffs, increase self-consumption of rooftop solar power, improve power quality, and significantly reduce diesel generator usage.

Despite these advantages, awareness regarding these commercial applications remains limited among many industrial consumers. As more demonstration projects and successful case studies emerge, businesses are likely to view BESS not merely as an emergency backup solution but as a strategic asset capable of improving operational efficiency and reducing long-term energy costs.

India currently imports a significant share of battery cells and critical raw materials, making the industry vulnerable to global supply chain fluctuations and commodity price volatility. The government’s ACC PLI scheme aims to establish 50 GWh of domestic manufacturing capacity, which is expected to strengthen local supply chains, reduce dependence on imports, and gradually lower battery costs.

As domestic manufacturing scales up over the coming years, greater price competitiveness and improved availability are expected to make battery storage more accessible to commercial and industrial consumers across sectors.

Market signals

Despite current adoption challenges, India’s battery storage market is expanding rapidly. According to the National Electricity Plan, the country is expected to require nearly 236 GW (approximately 411 GWh) of Battery Energy Storage Systems by 2031-32 to effectively integrate renewable energy into the grid. Industry reports also indicate that India issued over 25 GW of battery storage tenders during 2024–25, making it one of the fastest-growing energy storage markets globally.

Globally, BloombergNEF projects battery demand to exceed 5,500 GWh annually by 2035, while battery prices are expected to continue declining as manufacturing scales up. These trends will significantly improve project economics and make storage increasingly attractive for commercial users.

Battery energy storage systems are poised to become an integral part of India’s commercial and industrial energy landscape. As renewable energy penetration increases, electricity pricing becomes more dynamic, and businesses pursue ambitious decarbonization goals, the need for flexible energy storage will continue to grow.

The pace of adoption will ultimately depend on three critical factors: continued reductions in battery costs, greater access to innovative financing, and a supportive regulatory framework that unlocks the full commercial value of storage. Companies that invest early in battery storage will be better positioned to reduce energy costs, enhance operational resilience, and meet their sustainability commitments in an increasingly renewable-powered economy.

For India’s C&I sector, the question is no longer whether battery energy storage systems will become mainstream it is how quickly the ecosystem can overcome today’s barriers to unlock tomorrow’s opportunities.

The views and opinions expressed in this article are the author’s own, and do not necessarily reflect those held by ESS News or pv magazine.

From pv magazine India