Material Insights · Understanding the Material World

AC transmission and Lithium iron phosphate batteries

Grid batteries, now mostly LFP, charge from the transmission grid when power is cheap and feed it back at the evening peak, and India is pushing them with viability gap funding and transmission charge waivers that treat storage as part of the grid.

AC transmission (energy) and Lithium iron phosphate batteries (energy): 4 relationships.

How they are linked

1. Grid charges batteries

Physical flow · Medium · AC transmission to LFP batteries

Grid-scale LFP batteries draw power from the AC network through inverters when prices are low, typically during midday solar output.

  • about 90% share of LFP in battery storage deployments, 2025

LFP has become the default chemistry for grid storage, about 90% of deployments in 2025. Charging from the grid at midday absorbs surplus solar output.

Sources: IEA; Material Insights (Energy Institute, IEA data)

2. Batteries discharge to the grid

Physical flow · Medium · LFP batteries to AC transmission

Stored energy is converted back to AC and sent into the grid at peak hours; in the site model about a third of LFP battery energy flows to transmission and the rest to other uses.

  • 34% of LFP battery energy flowing to AC transmission (site model)
  • 108 GW battery storage added worldwide in 2025

Global additions in 2025 were 40% higher than in 2024, with China around 60% of them.

Sources: IEA; Material Insights (Energy Institute, IEA data)

3. Storage firms solar for the evening

Transition · Rising · Batteries make grid power dispatchable

Batteries shift cheap daytime solar into the evening peak, which lets the same transmission lines carry more renewable energy and reduces the need for peaking plants.

  • about Rs 10.18 per kWh Indian storage bids, 2022 to 2023, at two cycles a day
  • about Rs 2.1 per kWh recent Indian bids without VGF, two cycles a day (2025)
  • about Rs 2.5 per kWh average Indian solar tariff in recent tenders (2025)

The discovered cost of storage in India fell by about four fifths in roughly three years, and at two cycles a day it is now below the average solar tariff. At the 1.5 cycles a day the ministry expects in practice, it is about Rs 2.8 per kWh, slightly above that tariff.

Sources: Outlook Business (PTI, Rajya Sabha reply by the Ministry of Power)

4. VGF and transmission charge waivers

Policy · High in India · Grid policy pays for storage

India funds battery storage through the Power System Development Fund and waives inter-state transmission charges for it, treating storage as a grid asset rather than a generator.

  • Rs 5,400 crore VGF for 30 GWh of battery storage, June 2025
  • Rs 18 lakh per MWh VGF support rate
  • 13.2 GWh earlier tranche already under implementation

The ISTS charge waiver for co-located storage applies to projects commissioned by June 2028, for 12 years, while the waiver for standalone storage tapers after June 2025. The PLI scheme for cell manufacturing reserves 10 GWh of its 50 GWh for grid storage.

Sources: PSU Watch; Outlook Business (PTI, Rajya Sabha reply by the Ministry of Power)

For investors

Key learnings

  1. Indian battery storage bids fell from about Rs 10 to about Rs 2 per kWh in roughly three years, bringing storage cost close to the solar tariff it adds to.
  2. Policy support through VGF and ISTS waivers is tied to commissioning deadlines such as June 2028, so project timing drives returns.
  3. LFP made up about 90% of new storage and China about 60% of additions in 2025, so Indian storage costs are exposed to Chinese supply chains and trade policy.

What to track

  • Indian BESS auction tariffs (Rs lakh per MW per month): Falling tariffs show competition and cell price pass-through (Per auction · SECI, NTPC, NHPC, state utilities)
  • LFP cell and system prices: Lower cell prices widen storage margins (Monthly · BNEF, trade press)
  • Storage commissioned versus awarded (GWh): A gap signals execution risk before waiver deadlines (Monthly · CEA)

For policymakers

Key learnings

  1. Storage lets India use its transmission lines more fully by moving midday solar to the evening peak.
  2. VGF of Rs 18 lakh per MWh and ISTS waivers are the main levers; their deadlines need to match realistic build times.
  3. Domestic cell manufacturing under the PLI scheme, with 10 GWh of its 50 GWh reserved for grid storage, would reduce reliance on imported cells.

What to track

  • Battery storage installed (GW, GWh): Progress against storage needs for 2030 renewable targets (Monthly · CEA)
  • Evening peak shortages and solar curtailment: Rising curtailment shows storage is lagging (Daily · Grid India)

India

India supports 43.2 GWh of grid batteries through two VGF tranches, 13.2 GWh and 30 GWh, and waives inter-state transmission charges for co-located storage commissioned by June 2028.

Sources

  1. Global Energy Review 2026: battery storage, IEA (2026)
  2. ML Khattar announces Rs 5,400 crore VGF scheme for battery storage, extends ISTS waiver for BESS, PSPs, PSU Watch (2025)
  3. Battery energy storage cost falls to Rs 2.1/unit from Rs 10.18 in 2022-23: Power Min, Outlook Business (PTI, Rajya Sabha reply by the Ministry of Power) (2025)
  4. Energy flows, Material Insights, Material Insights (Energy Institute, IEA data)