BESS Tariffs Are Misleading — Here’s Why

Stop Comparing Just the Battery Price — Look at What’s Inside the Box

Every time a new battery storage auction makes the news, the headline screams a single number — “Record low tariff discovered!” or “Battery storage hits ₹1.77 lakh/MW/month!” And instantly, the comparisons start: “Lower than the last bid!” or “Cheaper than SECI!” But this obsession with the price tag misses the real story. Because in energy storage, the number that looks lowest on paper often hides more than it reveals. Comparing just the BESS price without understanding what’s built into it , is like judging a car only by its sticker price, ignoring the engine, fuel efficiency, and maintenance costs.

1. The sticker price hides the system’s DNA

When we see ₹1.775 lakh/MW/month, what exactly are we comparing? Is it the same technology, performance standard, or warranty? Hardly ever. A 2-hour battery at 85% Round Trip Efficiency (RTE) and 95% availability is completely different from a 4-hour system that operates in extreme heat or cycles twice a day. Yet both may appear similar in cost terms. Every bid comes with its own assumptions on life, chemistry, control systems, and degradation. Without decoding those, any comparison is meaningless.

2. Higher efficiency and availability come at a premium

A BESS promising 95% availability and 85% RTE isn’t built on luck. It demands: - Advanced battery management systems (BMS) - Redundant modules and optimized thermal control - Top-tier inverters and cells capable of sustaining thousands of cycles

Each of these adds to the cost. So when one developer quotes lower, check if they’ve compromised on these guarantees — or on the replacement and augmentation plan that will actually keep the system running for 15 years.

3. Depth of Discharge (DoD): how deep we go defines how long we last

A 100% DoD battery gives more energy in the short term but degrades much faster. A system operating at 80–85% DoD preserves cell health, extends life, and reduces augmentation cost.Thus, a seemingly higher price can actually reflect a better long-term cost curve. DoD is the silent determinant of how many years a “cheap” battery remains truly functional. 

Charging energy is not just a cost; it defines the system’s carbon and economic efficiency.

• Charging from solar is clean but depends on availability windows. Idle batteries mean lost revenue.

• Charging from grid power might be easier but increases emissions and could even worsen peak load stress.

• Charging during low-demand, low-cost hours (say midnight wind surplus) can improve system value — if dispatch is smart.

A well-designed BESS isn’t just about capacity; it’s about intelligent charging coordination that aligns with the grid’s needs and renewable availability.

4. Technology, cooling, and software make the difference

Not all batteries are created equal: - LFP chemistry is safer and longer-lived than NMC, though slightly bulkier. - Active thermal management ensures durability in India’s 45°C summers. - Energy Management Systems (EMS) decide when and how to charge, discharge, and maintain efficiency. A system with an intelligent EMS can deliver 2–3% higher usable energy each day. That difference, compounded over 15 years, saves crores — even if it costs slightly more upfront.

5. The missing half: charging energy and its source

Here lies the biggest blind spot in BESS price analysis — charging cost. A battery doesn’t generate power; it only stores it. So, someone must pay for the charging energy, and that cost is typically not included in the ₹/MW/month figure. Who pays? In almost all Indian tenders (SECI, NTPC, RVUNL, NVVN), the procurer — usually a DISCOM — provides charging power at its own cost. The developer is only responsible for delivering stored energy back at guaranteed efficiency. So, if a BESS charges using solar at ₹2.80/kWh and delivers with 85% RTE, the effective cost of energy coming out of storage becomes: ₹2.80 ÷ 0.85 = ₹3.29/kWh

Now, add the capacity charge (say ₹3.6/kWh equivalent) and the real delivered cost of stored energy is ₹6.9–₹7.0/kWh — more than double the headline number.

6.  Why the charging source and timing matter

Charging energy is not just a cost; it defines the system’s carbon and economic efficiency. - Charging from solar is clean but depends on availability windows. Idle batteries mean lost revenue. - Charging from grid power might be easier but increases emissions and could even worsen peak load stress. - Charging during low-demand, low-cost hours (say midnight wind surplus) can improve system value — if dispatch is smart.

A well-designed BESS isn’t just about capacity; it’s about intelligent charging coordination that aligns with the grid’s needs and renewable availability.

7. Technical and operational losses

Charging also involves physical losses: - PCS (inverter) inefficiency: ~2–3% - Auxiliary consumption (cooling, control): ~3–5% - Transformer and cable losses. Together, 6–8% of energy is lost before even considering RTE degradation over time. Ignoring these in price comparisons can make a tender look cheaper than it will actually operate.

8. Calculating a realistic LCOE

Let’s take the RVUNL case as a live example: - Capacity: 1 GW / 2 GWh - Capacity charge: ₹1.775 lakh/MW/month - Term: 15 years - RTE: 85% - Input energy cost: ₹2.80/kWh 1 cycle per day

Then: - Energy Delivered in a year =2000*365*.95 (Availability)*.85 (RTE)= 589 GWh

Energy delivered annually ≈ 589 GWh - Energy required to charge = 589 / 0.85 = 693 GWh - 

Annual Capacity Payment=  ₹ 1.775*10^5*1000*12= ₹ 213 crore

Cost of charging = 693 × ₹2.80 = ₹1,94 crore - Capacity payment ≈ ₹213 crore - Total cost = ₹407 crore - Effective LCOE = ₹6.9/kWh

So, that ₹1.775 lakh/MW/month bid actually translates to ₹7/unit delivered — still competitive, but far from the “record low” many assume.

9. Warranty, augmentation, and lifecycle guarantees

Another missing piece in simplistic price talk: warranties and augmentation clauses. A 15-year project life demands at least one major augmentation, typically around year 7–8. If a bid doesn’t explicitly include this cost, the system’s capacity will fade below guarantee, and replacement will fall on the procurer. Smart bids factor this in — their higher price reflects financial realism, not inefficiency.

10. The real metric: Levelized Cost of Delivered Energy

Higher Depth of Discharge (DoD) reduces capital cost per kWh but shortens battery life, while higher Round-Trip Efficiency (RTE) increases upfront cost but lowers the levelized cost of energy (LCOE). Greater availability raises O&M costs but improves revenue reliability. Superior thermal management and advanced BMS increase capital cost but reduce degradation. Longer cycle life decreases LCOE, and a well-defined augmentation plan helps maintain steady performance. Finally, safety and compliance are mandatory and impact insurability. 

The correct way to compare storage systems is: LCOE delivered = (Capacity cost + Charging energy cost) / Delivered energy (kWh).That integrates everything — efficiency, life, degradation, and charging source. Until India’s tenders, regulators, and analysts adopt this as the benchmark, tariff comparisons will remain half-informed and misleading.

11. What should change going forward

To make storage pricing transparent and policy-relevant, India should: - Publish delivered energy cost (Rs/kWh) including charging losses. - Define standard metrics for RTE, DoD, and availability. - Reward higher efficiency and availability with performance-linked bonuses. - Require charging source declaration (RE, grid, or mix) in bid evaluation. - Introduce two-part tariffs — capacity charge + energy charge — to reflect real economics. Such reforms will make comparisons meaningful and attract quality developers who design for longevity, not just L1 optics.

12. The forward view

India plans to install over 40–50 GW of energy storage by 2030. At that scale, transparency in pricing and performance metrics will be critical.

Storage will increasingly act as the “shock absorber” for renewables — balancing variability, providing grid services, and ensuring reliability. The cheapest bid won’t always be the best; the most optimized, efficient, and integrated system will.

13. The bottom line

The ₹/MW/month figure is only the headline. The real story is in: - How efficiently it charges and discharges - What it’s charged with - How long it lasts - How smartly it’s managed. Those who focus only on the quoted number miss the economics, the engineering, and the energy transition itself. As India moves deeper into the storage era, the conversation must shift — from “What’s the cheapest bid?” to “What delivers the best value per delivered kWh?” Because in the end, cheap batteries fail; smart systems endure.