- The short version — what matters in one screen
- Where BESS earns: peakers, firming, and grid services
- Unit economics: a simple stack you can sanity-check
- Contracts: RTC blends, peak power, and tolling models
- Risks, bottlenecks, and what to watch next
The short
- Use-case first, chemistry later. 1–2h for ancillary/peak-shave, 4h for RTC firming, 8h+ only when curtailment is chronic.
- Tariffs beat tech. If peak/off-peak spreads are thin, returns compress regardless of pack prices.
- Capex is falling, but integration isn’t free. EPC, EMS, land, O&M, and augmentation add ~20–35% over pack costs.
- Contract shape drives IRR. Blended RTC PPAs and capacity payments derisk cashflows vs pure merchant.
Where BESS actually earns in India
1) Peak-shaving / “peaker” replacement (2–4h)
Store cheap mid-day solar; discharge in evening ramps. Revenues hinge on the spread between mid-day and evening tariffs.
Revenue Arbitrage + Capacity Payment (if contracted)
2) RTC firming (4h typical)
Pair with solar/wind to meet a firmed hourly schedule. Works when curtailment is non-trivial and penalties bite.
Revenue PPA tariff + Availability Bonus – Deviation Penalties
3) Ancillary & grid services (1–2h)
Frequency response, reserves, black-start. Requires dispatch discipline and metering clarity.
Revenue Regulated fees + market payments
4) Behind-the-meter (1–3h)
Industrial consumers shave demand charges, enhance PV self-consumption, add backup.
Revenue Avoided grid costs + reliability value
Unit economics: a simple sanity stack
Use this stylised 4-hour, 100 MW / 400 MWh utility BESS as a check. Numbers are indicative and will vary by vendor, location, and financing.
| Line item | Assumption | Notes |
|---|---|---|
| Pack + PCS + BoP | ₹22,000–26,000 / kWh | DC pack, PCS, transformers; chemistry-agnostic range |
| EPC / Integration | +20–30% | Site works, interconnect, EMS, commissioning |
| O&M (annual) | 1.5–2.5% of capex | Incl. EMS, warranties, insurance |
| Degradation & Augmentation | ~15–20% energy add over life | To maintain deliverable MWh |
| Round-trip efficiency | 86–92% | Impacts arbitrage margins directly |
| Utilisation | ~250–300 cycles/year | RTC contracts may drive higher scheduled cycling |
Back-of-envelope LCOES: Combine WACC-levelised capex + fixed O&M over lifetime energy delivered. Stress-test with ±20% capex and ±10pp efficiency.
Rule-of-thumb: If peak–off-peak spread × cycles × efficiency > levelised cost per kWh cycled, the economics close. Capacity payments dramatically help.
Contracts shape cashflows
- RTC blend: Solar + wind + 4h BESS; availability-linked payments; deviation penalties cap upside but protect downside.
- Peak power: Fixed evening block delivery; option to pool across multiple plants.
- Tolling / capacity: Buyer pays a fixed MW “readiness” fee; operator monetises energy separately.
Risks & mitigations
- EMS & dispatch errors: Kill margins; invest in forecasting and controls.
- Augmentation surprises: Lock augmentation price bands upfront.
- Policy & metering ambiguity: Standardise measurement for multi-use stacking to avoid double counting.
- Supply concentration: Dual-source critical components; enforce spares SLAs.
Operator checklist
- Pin your primary revenue (arbitrage vs capacity vs RTC premium).
- Model spreads under conservative volatility; don’t back-solve IRR.
- Pre-agree augmentation logic and warranty triggers.
- Pilot dispatch algorithms in shadow mode before go-live.