Storing the sun- a major revolution

The global energy transition is gaining momentum, with renewable energy emerging as an integral pillar of sustainable development. Defined as energy harnessed from naturally replenishing sources - such as sunlight, wind, water, and geothermal heat, renewables are not just alternatives to fossil fuels; they’re the future. Among them, solar energy has witnessed explosive growth, driven by falling panel costs, supportive policy, and vast untapped potential across sun-rich geographies like India.

But while the sun delivers power generously through the day, the grid’s demand curve doesn’t align. Peak consumption often hits after sunset - right when solar generation falls to zero. This temporal mismatch has long been a bottleneck in maximizing solar’s utility.

That’s where Battery Energy Storage Systems (BESS) step in - storing surplus solar power during the day and releasing it at night, transforming solar from a daytime-only source to a 24/7 asset. The combination of solar + BESS is not just a technical evolution; it’s a paradigm shift in how we produce, store, and consume energy.

The roots of solar & modules

1800s: The Discovery of Photovoltaic Effect

It all began in 1839, when a French scientist named Edmond Becquerel discovered that sunlight can create electricity, this was the birth of the photovoltaic (PV) effect.

1954: The First Practical Solar Cell

Fast forward to 1954, Bell Labs in the U.S. created the first working silicon solar cell. It was expensive and only about 6% efficient, but it was a start.

1958-1970s: Solar in Space

Solar panels first powered satellites like Vanguard I. Back on Earth, the tech was still too costly for common use.

1980s-2000s: Falling Costs, Rising Adoption

Governments began supporting solar energy. Efficiency improved, and costs started to come down slowly.

2010s: Solar Goes Mainstream

With the rise of China’s solar manufacturing, prices dropped drastically. Mono PERC (Passivated Emitter and Rear Contact) panels became popular for better performance.

Post 2020 & current landscape: The Era of High-Efficiency Modules

Parameters	Mono PERC	TOPCon	HJT
Initial Capex	$31-38 million per GW	$38-46 million per GW	$69-75 million per GW
Cell Efficiency	23.2% - 23.7%	24.5% - 25.2%	24.5% - 25.2%
Module Efficiency	20.0% - 21.5%	22.0% - 23.0%	22.0% - 23.0%
Bi-faciality	70% - 75%	80% - 85%	80% - 90%
Complexity	Moderately complex	Less than HJT	Most complex
Temperature Co-efficient of Power  (Losses and Damages)	-0.35% / °C PERC cells experience more noticeable power decline at elevated temperatures, prone to LID and PID losses. Such losses are high compared to peers	-0.29% / °C Offers significant power improvement over PERC cells at elevated temperatures. PID and LID losses are lower compared to Mono PERC.	0.24% to -0.26% / °C Lowest temperature coefficient. HJT cells experience minimal power loss even at high temperatures. Not prone to PID and LID losses due to n-type cell structure

Emergence of BESS

A Battery Energy Storage System (BESS) is fundamentally an electrochemical device designed to serve as a high-capacity power bank for the electricity grid. It collects and stores electrical energy from the grid or a generation source (like a solar farm) and then discharges that energy at a later time when demand is high or the source is unavailable.

Feature	Solar Module (Solar Capacity)	Battery Energy Storage System (BESS)
Core Function	Generation/Supply of Energy	Storage/Time-Shifting of Energy
How it Works	Converts sunlight directly into electricity.	Charges (collects energy) and discharges that energy later.
Primary Goal	Maximizing electricity production during daylight hours.	Stabilizing the power grid and providing backup power by addressing intermittency.
Role in the Grid	Provides energy supply (can cause grid instability if not managed).	Makes variable solar power a reliable, round-the-clock energy source.
Units of Measure	Typically measured in MW (Megawatts) or GW (Gigawatts).	Measured in MW (for power/flow) and MWh or GWh (for capacity/storage).

The system itself comprises several key components:

• Cells: The basic units that convert electrical energy into chemical energy and vice versa. These are assembled into modules and then racks.

• Battery Pack: Multiple cells connected to achieve the desired voltage and capacity.

• Battery Management System (BMS): Crucial electronics that ensure safe operation and longevity by protecting the cells from harmful voltage, temperature, and current.

• Container: A large enclosure (often about 6m long, 2.5m wide, and 3m high) housing the racks and all management devices, including auxiliary cooling and control systems.

The Core Business Model: Storing Cheap, Discharging Dear

The economic rationale for BESS is clear: arbitrage and grid stability. The core business model involves storing cheap electricity, typically generated by solar during the day, and redistributing it when prices and demand rise in the evening peak hours (the 'duck curve' effect). The chart below clearly illustrates this principle, showing batteries charging mid-day when net demand is low and discharging in the evening when demand and prices are highest.

Morning hours (6 AM - 9 AM):

Electricity demand begins to rise as residential and commercial activity starts.

However, solar generation is still negligible because the sun hasn’t fully risen.

Result: Conventional sources (coal, gas, hydro) need to meet this early morning demand.

Midday hours (10 AM - 2 PM):

Solar generation peaks due to maximum sun exposure.

But demand stays moderate, resulting in a dip in net demand from the grid.

Result: Excess solar energy floods the system -much of it goes unused or is curtailed.

Evening hours (5 PM - 8 PM):

As the sun sets, solar generation rapidly drops to zero.

Meanwhile, demand peaks as people return home, use lighting, appliances, and cooling.

Result: The grid must ramp up conventional generation very quickly-creating operational strain and costs.

This sharp rise and fall in net load forms the iconic shape of a duck-hence, the “Duck Curve.”

Why It Became a Problem

• The grid struggles to manage this rapid evening ramp-up.

• Surplus solar at noon is wasted due to lack of demand.

• Solar alone can’t serve peak evening loads -when demand and pricing are highest.

Global and Indian Market Trajectory

The global BESS market is expanding exponentially. Global annual energy storage additions are projected to jump from 74 GWh in 2023 to 421 GWh by 2030. By 2030, a cumulative global storage capacity of 1,848 GWh is anticipated, with the majority (74%) being Grid Scale.

India and the U.S. are identified as two of the world's fastest-growing BESS markets. The Government of India aims to set up a massive 236 GWh cumulative Battery Energy Storage System by 2032.

In the near term, as per the National Energy Policy 2023 (NEP 2023), India is estimated to add 8,680 MW / 34,720 MWh of BESS capacity between 2022 and 2027, followed by a dramatic scale-up of 38,564 MW / 201,500 MWh between 2027 and 2032. This aggressive target underscores the nation's commitment to grid modernization and renewable energy integration. India's energy storage capacity is projected to expand twelvefold to 60 GW by FY 2032.

Structural Tailwinds: Government Policy and Economics

The BESS revolution in India is not organic; it is a direct consequence of clear, decisive government mandates and financial support. These 'tailwinds' are creating a protected market with massive demand visibility.

The Mandates: Creating Non-Negotiable Demand

Grid Stability & Renewable Energy Integration: Rapid growth in solar-rich states like Maharashtra, Gujarat, and Rajasthan has created a critical mismatch between daytime peak solar generation and sharp drops post-5:00 PM, leading to grid instability. BESS is the only technical solution to make the grid more resilient and manage this intermittency.

Mandatory BESS for Solar Projects: In July 2025, the Ministry of Power mandated that all new solar tenders must include a minimum of two hours of co-located energy storage, equivalent to 10% of the project's installed solar capacity. This applies to all renewable energy implementing agencies and state utilities.

Energy Storage Obligation (ESO): The government has set a long-term trajectory for electricity distribution companies (discoms), requiring the ESO to increase from 1% in FY 2023-24 to 4% by FY 2029-30. At least 85% of the energy stored must come from renewable sources.

Replacement of Diesel Generators: The Electricity (Rights of Consumers) Amendment Rules, 2022, require consumers using diesel generators for backup to switch to cleaner technology (like renewable energy with battery storage) within five years. This directly opens up the commercial and industrial (C&I) segment.

Financial Support and Incentives

To support these mandates and encourage domestic manufacturing, the government has launched several schemes:

Viability Gap Funding (VGF): An initial scheme approved in September 2023 allocated ₹3,760 crore for 4 GWh of BESS capacity. Critically, in June 2025, an additional ₹5,400 crore in VGF was announced to support 30 GWh of new standalone BESS development by 2028.

Production-Linked Incentive (PLI): A PLI scheme worth ₹18,100 crore is in place to boost domestic Advanced Chemistry Cell (ACC) battery manufacturing. Manufacturers are incentivized to localize up to 60% of battery material.

Inter-State Transmission System (ISTS) Waiver: ISTS charges for BESS projects commissioned before June 2028 have been waived to reduce developer costs. This waiver was also extended for co-located renewable energy and BESS projects until June 30, 2028.

Domestic Software Requirement: VGF guidelines now require the application software for the BESS Energy Management System (EMS) to be developed in India.

Value Chain

The BESS value chain is a global, multi-stage process that transforms raw materials into sophisticated, grid-connected energy assets. For sustainability and resource security, this is increasingly viewed as a circular process rather than a linear one. 

1. Upstream: Raw Materials 

● Mining & Sourcing: This stage involves the extraction of key minerals such as lithium, cobalt, nickel, manganese, and graphite. The geographic concentration of these resources presents significant geopolitical and supply chain risks. 

● Refining & Processing: Raw ores are chemically processed to achieve the high purity required for battery-grade materials, such as lithium hydroxide, cobalt sulfate, and purified graphite. 

2. Midstream: Core Component Manufacturing 

● Active Material Production: This is a critical, high-value stage. Cathode Active Materials (CAM) like LFP or NMC, and Anode Active Materials (AAM), primarily graphite, are produced. The cathode material largely determines the battery's performance and cost.

● Component Manufacturing: Other essential components are made, including the separator (a microporous membrane that prevents short circuits) and the electrolyte (a liquid medium that allows ions to flow).

● Cell Manufacturing: In highly controlled "dry rooms," the electrodes and separators are assembled into sealed battery cells (cylindrical, prismatic, or pouch), which are then filled with electrolyte.

3. Downstream: System Integration

● Module & Pack Assembly: Individual cells are connected and packaged into modules, which are then assembled into a final battery pack that includes the BMS and cooling systems.

● BESS Integration: The battery packs are installed into containers along with the PCS, TMS, fire suppression, and EMS to create a complete, turnkey BESS unit.

● Project Deployment (EPC): This final stage involves the on-site Engineering, Procurement, and Construction (EPC) of the BESS project, including grid interconnection and commissioning.

If you'd like to discuss your portfolio or explore how Xylem can help you navigate this market, consult with us here.