India's energy storage sector is poised for a transformative breakout in 2026, with battery energy storage capacity addition set to surge nearly 10-fold from 507 MWh in 2025 to approximately 5 GWh in 2026, according to a comprehensive market analysis released by the India Energy Storage Alliance (IESA). The total capacity commissioned until 2025 is 708 MWh.

The report reveals that 2026 marks a critical inflection point as the industry transitions from tendering to execution, with 60 GWh of projects entering the implementation phase following a record-breaking 2025 that saw cumulative capacity surge 84 per cent to reach 224 GWh.

While 2025 was defined by unprecedented tendering activity, 69 tenders totaling 102 GWh, nearly equal to all tenders issued between 2018 and 2024 combined, 2026 will be the year the industry proves itself operationally, as the wave of tenders awarded since mid-2023 finally materialize into commissioned assets with typical project timelines of 18-24 months.

"All eyes will remain on whether the performance of these projects is in line with what was committed," Debmalya Sen, President, India Energy Storage Alliance (IESA), stated. "2026 will be the year when a number of projects will enter the operational phase. The next challenge is financing of these projects, especially the ones with low tariffs."

Perhaps the most dramatic development of 2025 was the collapse of tariffs to levels that stunned the industry. Standalone 2-hour Battery Energy Storage System (BESS) tariffs plummeted from Rs 2,21,000 /MW/month in early 2025 to just RS 1,48,000 /MW/month by year-end in APTRANSCO's tender. Solar-plus-4-hour-BESS projects saw tariffs fall to Rs 2.70-2.76/kWh, with over 50 new bidders entering the market and intensifying competition.

The aggressive pricing has raised persistent questions about project viability. "At present, the number of projects which have received financing is only a few from the plethora of tenders," he added. "Whether all projects see the light of day will often be questioned till they are delivered."

March 2026 will serve as a crucial test when Adani commissions one of the world's largest single-location BESS projects, 1,126 MW/3,530 MWh in Gujarat. January brings Rajasthan's tender for India's largest solar-plus-BESS project at Pugal Solar Park, while the commercial and industrial market shows signs of rapid emergence following Juniper Green Energy's pioneering 60 MWh merchant BESS installation in December.

"The transition from tendering to execution in 2026 represents a watershed moment for India's energy storage sector," said Vinayak Walimbe, Managing Director, Customized Energy Solutions. "While the aggressive tariff compression we witnessed in 2025 demonstrates market confidence, the real test lies in delivering these projects at promised price points amid battery cost uncertainties and financing constraints. Success in 2026 will require not just competitive bidding, but operational excellence, innovative financing structures, and supply chain resilience. The industry must now prove that India can execute at scale what it has successfully tendered."

The government provided crucial backing through the second tranche of Viability Gap Funding worth Rs 54 billion, supporting 30 GWh of standalone BESS, while mandating 20 per cent domestic value addition for VGF projects. Interstate Transmission System charge waivers were extended until 2028 for pumped storage and solar-plus-BESS projects. States accelerated commitments with Rajasthan mandating 5 per cent energy storage for renewable projects above 5 MW and Bihar targeting 6.1 GWh by 2030.

The pumped storage hydro segment experienced significant momentum, with the competitive bidding pipeline expanding to 132 GWh from 50 GWh in 2024. JSW and UPPCL signed a landmark 1.5 GW/12 GWh Pumped Hydro PPA at RS 77,20,000 /MW/year in Uttar Pradesh.

However, IESA identified critical uncertainties ahead. China's tightening trade policies and export restrictions on battery materials threaten the cost assumptions underlying ultra-low tariffs. In an environment where China has been slowly tightening trade and implementing ways of stopping the cost drop of batteries, the question remains: will the assumptions taken for the ultra-low tariff projects be valid? The drop in battery costs has been stagnant for some time now. Which way the curve goes from here up or down will decide many things.

NTPC's thermal-plus-BESS project could open an entirely new market segment if successful, while only 758.4 MWh of cumulative commissioned capacity underscores how much execution lies ahead.