New Delhi, Aug 5
India's battery energy storage systems (BESS) operating without fixed contracts – known as merchant BESS – turned profitable for the first time in 2024 and new battery projects commissioned in 2025 could deliver internal rates of return (IRR) of 17 per cent by operating in power exchanges, due to potential fall in upfront costs, a report said on Tuesday.
Falling battery costs and higher earnings from volatile power markets drove this shift, Ember, an energy think tank, said in its report.
According to the report, battery costs have declined by around 80 per cent over the past decade to Rs 1.7 million per megawatt-hour (MWh) in 2025 from Rs 7.9 million/MWh in 2015.
At the same time, potential revenues from market participation have increased fivefold in the same period to Rs 2.4 million/MWh in 2025 from INR 0.5 million/MWh in 2015.
As a result, in 2024, merchant BESS revenues surpassed costs for the first time, making it a bankable electricity grid asset, the report stated.
“Merchant BESS has often been viewed as a low-return investment. But the changing dynamics of the wholesale power market, with rising price volatility, coupled with falling battery costs, have made it a commercially viable investment opportunity today,” said Duttatreya Das, energy analyst at Ember.