Battery storage investment in India expected to cross $1 bn in 2025, but high financing costs remain challenge: IEA

NEW DELHI: Battery storage investment in India is expected to cross $1 billion in 2025; however, high financing costs remain a challenge, according to a recent report by the International Energy Agency (IEA).

The report noted that while battery storage investment continues to rise globally, challenges remain, particularly in developing economies like India, where high financing costs are still a major hurdle.

The IEA stated, “Developing economies continue to struggle with high financing costs, with financing costs for battery storage projects reaching twice the levels seen in advanced economies. Battery storage investment in India stands out, and is expected to surpass $1 billion in 2025.”

The report also shared that globally, investment in battery storage grew by 45 per cent in 2024 compared to the previous year. The United States, Europe, and China remained the largest contributors, accounting for more than 90 per cent of total global investment in the sector.

In India, however, despite the strong growth forecast, battery storage projects face difficulties due to high financing costs. These costs are nearly double compared to those in advanced economies, making it harder for such projects to achieve profitability.

The IEA stressed that targeted policies, regulatory measures, and financial support are essential to attract more investment in emerging markets. It stated, “Policies, regulatory measures and targeted incentives remain a key element in driving further progress, especially amid growing power price volatility, which is calling for more battery storage”.

The report also highlighted that battery storage projects are increasingly depending on multiple revenue sources to stay profitable. These include energy arbitrage, frequency regulation, peak shaving, and integration with renewable energy. But to fully unlock the potential of battery storage, a strong regulatory framework is required that ensures the revenue streams are cost-reflective and stable.

The situation in Europe presents a contrasting picture. After a decade of strong growth, the battery storage market in Europe slowed down in 2024. Despite this, power price volatility in the region is expected to drive future demand for storage, making policy support even more critical.

Meanwhile, in China, growth in utility-scale battery storage continues, supported by policy mandates that require energy storage to be part of new renewable projects. However, reforms expected in the second half of 2025 may lead to a cooling of this growth trend.

The report also flagged concerns around the supply of critical minerals used in batteries. After prices surged in 2022, key mineral prices like lithium saw a steep decline in 2024, helping reduce the production cost pressures on battery manufacturers.

The IEA says, while global investment in battery storage is on a strong upward path, emerging economies like India must address financing barriers to fully realize their potential in the battery storage market. (ANI)