Energy Storage Pivotal for India's Clean Power Transition: Economic Survey Insights
The Economic Survey 2025–26 has underscored that energy storage will be central to enabling reliable and large-scale adoption of renewables, supporting India's shift towards a clean, secure, and resilient power system. It emphasized the critical role of large-scale integration of Battery Energy Storage Systems (BESS) and Pumped Storage Hydropower (PSP) in managing the variability of renewable energy, stabilizing the grid, and meeting peak demand.
Renewable Energy Growth and Challenges
India's energy landscape is undergoing a significant structural transformation, with renewable energy accounting for 49.83% of total installed power capacity as of November 2025. The country ranks third globally in overall renewable capacity and solar installations, and fourth in wind capacity. Over the past decade, India's renewable capacity has more than tripled, rising from 76.38 GW in March 2014 to 253.96 GW by November 2025. This growth is attributed to:
- Supportive national renewable energy policies
- Large-scale project execution
- Strong private sector participation
However, the survey flagged several key challenges that could hinder this momentum:
- High capital costs
- Delays in land acquisition
- Constraints in grid availability
To address these bottlenecks, the survey called for targeted policy instruments, innovative financing mechanisms, and optimised project execution.
Power Sector Expansion and Digital Initiatives
India's overall installed power capacity rose by 11.6% year-on-year to 509.74 GW by November 2025. Between April and November of the financial year, India added 40.9 GW of generation capacity, significantly higher than the 15 GW added during the same period last year. However, transmission line addition lagged, with only 3,641 circuit kilometres (Ckms) added, down from 5,117 Ckms a year earlier.
In terms of last-mile electrification, the survey noted that 18,374 villages were electrified under the Deen Dayal Upadhyaya Gram Jyoti Yojana (DDUGJY), and 2.86 crore households gained electricity access under the Pradhan Mantri Sahaj Bijli Har Ghar Yojana (SAUBHAGYA). The demand-supply gap in power has been reduced to nil by November 2025, from 4.2% in FY14.
On digital initiatives, the survey highlighted the India Energy Stack (IES) as a key Digital Public Infrastructure for the power sector. IES aims to shift from a centrally managed system to one that is distributed, digital, and participatory, enabling households, farmers, and MSMEs to become active energy participants. It addresses issues such as:
- Fragmented digital foundations
- Siloed data
- Costly bespoke integrations
By standardizing identity, data exchange, measurement, and settlement, IES is expected to create an interoperable, competitive, and consumer-centric power ecosystem that converts participation into economic value.
Distribution Sector Challenges and Reforms
The survey also drew attention to the continued financial stress in the distribution sector. Between 2020-21 and 2024-25, accumulated losses of India's distribution utilities rose from Rs 5.5 lakh crore to Rs 6.47 lakh crore, with outstanding debt increasing to Rs 7.26 lakh crore. This is attributed to:
- Non-cost-reflective tariffs
- Delayed state subsidies payment
- High Aggregate Technical and Commercial (AT&C) losses
To address these long-standing structural issues, the proposed Electricity (Amendment) Bill, 2026 is intended to bring reforms. Despite these challenges, distribution utilities recorded a positive Profit After Tax of Rs 2,701 crore in FY25 for the first time, reflecting the impact of recent reform measures. This improvement has been accompanied by a sustained reduction in AT&C losses, from 22.62% in FY14 to 15.04% in FY25.
