Driven by the global energy transition wave and policy incentives, India’s renewable energy sector has developed rapidly.
The Ministry of Power of India has mandated that solar tender projects organized by Renewable Energy Implementing Agencies (REIAs) and state power companies must include energy storage systems (ESS). Specifically, solar PV tenders must integrate an ESS with at least 2 hours of duration at the same location, equivalent to 10% of the installed capacity of the solar PV project. Future policy adjustments may further refine the energy storage ratio and project exemption conditions.
Earlier, at the 21st Global SMES Summit organized by the Confederation of Indian Industry (CII) at the end of 2024, Prashant Kumar Singh, the Minister of the Ministry of New and Renewable Energy (MNRE) of India, stated that the government plans to initially require renewable energy plants to allocate energy storage capacity equal to 10% of their total capacity. ‘Now that battery prices are falling, it makes more sense to continue developing rather than building solar or wind projects separately. Considering the ongoing decline in battery prices, we will start by mandating the installation of a small amount of battery storage at solar or wind plants, and then gradually scale up. A 10% storage ratio will be a good starting point. In the future, depending on price trends, the mandatory storage ratio may rise to 30-40%.’
Clearly, India’s mandatory solar PV storage policy is an important step in its energy transition. Combined with economic incentives and technological innovation, the goal is to ensure a reliable power supply while accelerating the penetration of renewable energy.
As of March 2024, India has installed a total of 219.1MWh of lithium ion battery energy storage systems, of which 120MWh (40MW) were installed in Q1 2024. From the perspective of storage structure, photovoltaic storage accounts for 90.6% of the total installed capacity. Photovoltaic and wind power currently account for 28.9% of India’s installed power generation capacity, which has a significant impact on the stability of the power grid.
As of March 2024, 1.6GWh (about 1GW) of independent energy storage, 9.7GW of new energy storage, and 78.1GW of pumped storage projects in the Indian market are in different stages of development.
India’s Cumulative Energy Storage Capacity Reaches 219.1 MWh
According to the National Power Plan for 2031-2032 released by the Central Electricity Authority (CEA) of India, the demand for energy storage deployment will grow to 74GW/411.4GW h, of which 175.18GWh will come from pumped storage power generation facilities and 236.22GWh will come from battery energy storage systems.
India’s Energy Storage Market Achieves a 38% CAGR
Energy Storage Capacity Expected to Reach 27 GW/108 GWh by 2029-2030
Energy Storage Expected to Contribute 4% of Power Consumption by 2029-2030
As one of the world’s top five photovoltaic markets, India’s photovoltaic demand is growing rapidly due to policy support and huge electricity demand. According to data from the Central Electricity Authority of India, India’s cumulative photovoltaic installed capacity will reach 97.9GW in 2024, with an additional installed capacity of about 24.5GW, more than double the amount in 2023. At the same time, India’s energy storage demand is also on the rise.
At present, on the power generation side, India’s wind and solar power abandonment rate in 2023 is 17%, and the grid-level energy storage gap is as high as 12GW. On the user side, industrial and commercial electricity prices have risen by 40%, and the internal rate of return (IRR) of photovoltaic + energy storage has exceeded 25%. In terms of charging and swapping facilities, the penetration rate of two-wheeled vehicle swap cabinets has increased by 300% annually, becoming part of the new urban infrastructure. Some institutions have found that India’s energy storage market is growing rapidly at a compound annual growth rate of 38%.
According to the 2023 National Energy Plan, India plans to achieve 186GW of photovoltaic installed capacity from 2026 to 2027, and increase it to 365GW by 2032. The National Power Plan released by the Central Electricity Authority of India shows that by 2031-32, India is expected to need 47.24GW/236.22GWh of battery energy storage and 26.69 GW/175.18GWh of pumped storage to balance the power generation fluctuations of the expected 365GW solar and 121GW wind power generation capacity.
Faced with the explosion of energy storage market demand, India’s energy storage battery unit and component production faces major challenges. According to ZEE Business, India has announced a battery production capacity of about 120GWh, but more investment is needed to meet the expected demand. From the perspective of the construction cycle of battery production capacity, India still needs to rely on overseas energy storage supply chains to meet its domestic demand in the short to medium term.
At present, most of the battery units and related components, which account for about 80% of the cost of battery energy storage systems, come from China. In 2024, Chinese companies such as Sungrow Power Supply, Yinghe Technology, Rongjie Group Tianyi Energy, and Narada Power have successively won Indian energy storage orders.
In order to solve the problem of local supply chain shortcomings, the Indian government launched a $2.4 billion production chain localization incentive plan, with a subsidy of up to 35% for battery manufacturing. Faced with such a huge market cake, not only did the Indian energy storage brand Livguard announce that it will invest 33.6 billion rupees (about 2.876 billion yuan) in the next five years to expand its battery production capacity to 25GWh, but local giants such as Tata and Reliance also built factories.
In addition, due to the localization rate requirements put forward by the Indian government (a minimum of 40% of parts purchased locally), Foxconn has built a battery energy storage system factory in India by the end of 2024, and CATL is also quietly deploying localized production. SmartPropel Energy has obtained an order for an 80MW energy storage project in the Indian market in 2024. The Indian market is large in scale and is expected to contribute a large increase in the future.
India Implements Incentive Policies for Solar PV Projects
As a fast follower in the new energy sector, the Indian government previously planned to add 50 GW of renewable energy capacity annually from the 2023-24 fiscal year to the 2027-28 fiscal year, and has implemented a series of comprehensive incentive policies and measures for solar PV projects.
In terms of centralized projects, the Indian government launched the Solar Parks and Ultra-Mega Solar Power Projects Development Plan in 2014, with an expected additional 40 GW of solar capacity by the end of the 2026 fiscal year (March 31, 2026). Each MW can receive a subsidy of 2 million rupees (approximately 24,000 USD) or 30% of the total project cost, whichever is lower. In 2019, India initiated the Government Producer Scheme (CPSU Scheme Phase-II) with a goal of adding 12 GW of solar capacity. The scheme plans to provide 85.8 billion rupees (about 1.03 billion USD) to subsidize the construction of ground-mounted plants, and the subsidies for CPSU and the aforementioned solar parks and ultra-mega solar power projects can be used together.
For industrial and commercial projects, the most notable policy is the Green Energy Open Access Rules (GEOA) introduced in 2022. This allows renewable energy buyers to directly sign Power Purchase Agreements (PPAs) with sellers and only pay grid usage fees and other regulatory charges. The minimum power purchase requirement for buyers has also been reduced from 1 MW to the current 100 kW, which helps increase demand for small-scale industrial and commercial solar projects.
For home energy storage battery projects, in February 2024, India launched the Prime Minister’s Solar Home Scheme (PM-Surya Ghar), aiming for an additional 40 GW of distributed solar capacity by the end of the 2026 fiscal year. The scheme will invest 750 billion rupees and is expected to provide up to 300 kWh of free electricity per month to 10 million households. The subsidy amount varies with the project size: for projects less than 2 kW, the subsidy is 30,000 rupees (about 360 USD) per kW; for the 2-3 kW range, the subsidy for the first 2 kW remains the same, and the remaining kW is subsidized at 18,000 rupees (about 216 USD) per kW; for projects larger than 3 kW, a fixed subsidy of 78,000 rupees (about 936 USD) is provided.
For off-grid projects, India mainly relies on the Pradhan Mantri Kisan Urja Suraksha evam Utthaan Mahabhiyan (PM-KUSUM) program launched in 2019. The total budget for the program is 344.2 billion rupees (about 4.13 billion USD), with a goal of adding 34.8 GW of solar capacity. This includes building 500 kW to 2 MW solar plants, installing 1.4 million off-grid solar agricultural pumps, and converting 3.5 million grid-connected agricultural pumps to solar power. Depending on the region and project type, both the central and state governments provide subsidies of more than 30% of the total project cost.
From the demand-side policy perspective, since the Solar Parks and Ultra-Mega Solar Power Projects Development Plan, the Prime Minister’s Solar Home Scheme, and the Pradhan Mantri KUSUM Scheme all target the fiscal year 2026 as their installation milestone, and with the support of the aforementioned subsidies and policies, 2025 will be a critical year for India’s solar market. Overseas organizations expect India’s solar demand to reach 35-40 GW in 2025.
Stimulating Localization Manufacturing to Accelerate Development
In order to match the growth of PV demand and protect local developers and manufacturers, the Indian government has made a clever balance in terms of policy, encouraging manufacturers to integrate into the industrial chain through subsidies through its production-linked incentive program.
At the same time, India has implemented measures such as the approved list policy for PV module models and manufacturers, anti-dumping investigations on Chinese cells and modules, and import tariffs on the bill of materials to alleviate the adverse effects of imports.
India’s localized manufacturing policy mainly includes the Basic Custom Duty (BCD) levied on imported PV products in 2022, with battery and module tax rates of 25% and 40% respectively.
In addition, India approved the PLI capacity bidding plan (Production Linked Centive Scheme, PLI) in 2021, with a total investment of 240 billion rupees (about 2.88 billion US dollars) in the two phases of bidding, subsidizing the construction of photovoltaic capacity from upstream polysilicon to downstream components. The plan will calculate the subsidy amount based on sales, degree of localization and product conversion efficiency. The tendered capacity in the plan is expected to be implemented before 2026.
The ALMM component list (Approved List of Models and Manufacturers, ALMM), which the market pays most attention to, stipulates that government-related projects must use locally manufactured components in the list. As of January 2025, the component capacity in the list has reached 64.6GW, which can fully meet India’s terminal demand, and from June 2026, India will add a new ALMM battery list, further requiring government projects to use local components assembled with local batteries.
As India’s solar energy battery storage production capacity is relatively scarce due to insufficient technological reserves, even if the BCD tariff imposes a 25% import battery tax rate, Chinese imported batteries still have a competitive advantage. After the implementation of the ALMM component list, the Indian market is also dominated by local components assembled with Chinese batteries. If the ALMM battery list is implemented as scheduled in 2026, whether India’s battery production capacity can be put into production in time will be the key. On the other hand, due to the high cost-effectiveness of Chinese batteries, assuming that government project components must be assembled using local batteries by then, the increase in project costs may be detrimental to the future development of the photovoltaic market.
In short, although India’s planned production capacity is considerable, local manufacturing continues to face challenges. Most Indian manufacturers are plagued by labor shortages, lack of manufacturing experience, and visa issues with China, making it difficult to implement large-scale production capacity in the short term.
In the view of GTRI founder Ajay Srivastava, if local manufacturing cannot keep up with India’s growing demand for solar production capacity, India’s annual solar imports are expected to soar to US$30 billion by 2030. Currently, 90% of India’s solar manufacturing industry involves assembling components with imported cells, with local added value of only 15%. Therefore, GTRI recommends increasing upstream solar production investment, expanding the coverage of the PLI program, and cultivating a more skilled and technical workforce.
Main Obstacles to Achieving Grand Plans
First, the frequent changes in Indian policies have hindered the progress of its photovoltaic industry in recent years. Frequent changes in policies have forced investors and developers to make corresponding adjustments according to the policies, and it is difficult to stick to their commitments in the long run, which also limits the actual implementation of photovoltaics in the country. If you want to achieve 300GW of photovoltaic installed capacity by 2030, you must maintain policy stability.
Second, financing difficulties. India’s renewable energy projects have been facing investment risks ranging from payment delays to regulatory challenges, which has greatly increased the difficulty of photovoltaic companies in raising funds. India needs huge financing to realize the potential of renewable energy, including photovoltaic power generation. According to Ember’s report, India needs to invest $293 billion to achieve its renewable energy goals. Therefore, by 2030, India’s financing capacity must increase by nearly three times from an average of about 35 billion investment capacity in the past eight years to bridge the financing gap, but the effect remains to be seen.
Third, India’s distribution system is weak. India’s distribution companies are often seen as the weak link in the power supply chain due to their financial instability and inefficiency, often hindering the growth of various types of photovoltaic projects. Improving the distribution system is necessary to achieve stable photovoltaic growth in India. The Indian government should provide necessary support and subsidies to distribution companies to improve their financial situation and address inefficient management.
Fourth, there is a lack of highly skilled workers. India’s goal of achieving net zero carbon emissions by 2070 and using 50% renewable energy by 2030 has greatly increased employment opportunities and demand for skilled workers in the photovoltaic industry. In 2022, the Indian solar industry employed 282,000 workers in grid-connected and off-grid systems, and this number is expected to grow significantly in the coming years. Importantly, green jobs are also opening up abroad, creating huge opportunities for the effective deployment of Indian workers.
However, the lack of highly skilled workers has become a major obstacle to the growth of solar energy in India. According to the Solar Spectrum for New India survey, about 90% of respondents acknowledged the need for expertise in solar panel installation, with 45% believing that skilled labour was not available locally.
To address this issue, developing a skilled workforce must become a strategic priority for Indian policymakers to accelerate the development of PV. This requires increased investment in training programs and workforce skills improvement, an area that India has long neglected. Without a high-quality workforce, it will be difficult for India to achieve its goals.
Finally, how to ensure the implementation of existing plans. For many years, India has been actively customizing PV plans, such as PM SuryaGhar and PM KUSUM. Various support plans are expected to significantly increase India’s PV power generation capacity with the goal of multi-faceted development of the PV industry, but it is always difficult to achieve the goals on schedule. Therefore, for the Indian government, how to properly implement these plans is the real challenge.
