Battery participation in India’s power markets has traditionally been viewed as a low-return venture, burdened with uncertain revenues and lacking the security of long-term contracts. But the country’s shifting electricity landscape is reshaping that perception. Falling battery costs, growing renewable energy penetration and rising price volatility in power exchanges are now creating favourable conditions for battery energy storage systems (BESS) to deliver both strong financial returns and vital grid support, according to a recent analysis by UK-based think tank Ember.

Often described as the “multitool” of the clean energy transition, batteries are uniquely versatile. They can store surplus renewable power, stabilise the grid in real time, and provide the flexibility required to manage an increasingly variable electricity system. While the benefits have long been recognised, large-scale deployment has been constrained by prohibitively high upfront costs and the absence of a clear business model. That is beginning to change.

Price swings create opportunities

One of the strongest business cases for BESS is emerging in India’s wholesale power and ancillary services markets, the Ember report said. Prices in the day-ahead segment of power exchanges now swing widely, often plunging during peak solar generation hours and spiking in the evenings and nights. Batteries can exploit this volatility by charging when prices are low and discharging when they surge, earning revenues through arbitrage while also reducing extreme price fluctuations over time.

Ember’s study suggests that arbitrage alone could be sufficient to recover the full lifecycle costs of battery storage projects. The addition of ancillary services—such as grid balancing—further strengthens the case. Unlike conventional reserves, batteries can respond almost instantaneously, making them ideally suited to manage demand-supply imbalances. Crucially, BESS can also be compensated for absorbing excess electricity when the grid is oversupplied, adding another revenue stream.

The financial performance of merchant BESS projects is closely tied to the very inefficiencies they are designed to address. Yet Ember finds that even under conservative assumptions, batteries can generate attractive returns across a range of cost and efficiency levels. Shorter-duration BESS, in particular, show strong revenue prospects given current market dynamics.

With the regulatory framework now largely in place, the economics increasingly viable, and volatility in power markets rising, batteries appear well-positioned to expand without relying on long-term power purchase agreements.

Value for the grid

The system-level benefits of battery storage go well beyond direct revenues. A liquid, reliable short-term market is essential for renewable integration, and batteries can help reduce volatility and strengthen liquidity. This ensures that renewable developers remain confident about project viability, avoiding the risk of depressed tariffs during solar hours and encouraging greater investment in clean energy.

In addition, fast-acting reserves are becoming critical for grid stability as the share of renewables grows and coal remains inflexible. Batteries are eligible to participate in India’s Secondary Reserve Ancillary Services (SRAS) market, but analysts argue that incentive mechanisms need to be enhanced to unlock their full potential in balancing services.

India recently achieved a milestone, with non-fossil fuel sources accounting for 50% of installed power generation capacity. As the energy mix tilts further towards solar and wind, the ability of the grid to integrate rising shares of variable power will depend heavily on whether battery storage is scaled up at pace.

Until recently, the lack of a compelling business case kept batteries on the sidelines. Now, the combination of falling costs, regulatory clarity and growing market opportunities is transforming storage into a commercially attractive proposition. For developers and investors, the dawn of battery storage in India’s power sector no longer looks distant. For the electricity system, the timing could not be more critical.