UPERC Greenlights 375MW BESS Tariff: Paving the Way for Uttar Pradesh's Renewable Energy Leap

In a pivotal move for India's burgeoning energy storage sector, the Uttar Pradesh Electricity Regulatory Commission (UPERC) has approved the tariff adoption for a 375MW/1500MWh standalone Battery Energy Storage System (BESS) project, marking a significant step toward grid stability and renewable integration in one of the country's most power-hungry states. The project, facilitated by SJVN Limited as the intermediary procurer, features competitive tariffs discovered through a tariff-based competitive bidding (TBCB) process under the Ministry of Power's (MoP) Viability Gap Funding (VGF) scheme. This approval not only underscores the economic viability of large-scale BESS but also highlights evolving policy frameworks and market dynamics driving India's transition to a resilient, low-carbon power system.

The BESS, to be located near the 400kV/220kV Garautha substation in Jhansi, will be developed by Patel Infrastructure Ltd. (187.5MW/750MWh at Rs. 3,59,000/MW/month) and Enerica Infra 3 Pvt. Ltd. (187.5MW/750MWh at Rs. 3,59,999/MW/month). UPERC's order, dated January 20, 2026, also endorses a trading margin of 7 paise/kWh for SJVN, aligning with MoP guidelines and Central Electricity Regulatory Commission (CERC) regulations. With a scheduled commercial operation date (SCOD) of January 15, 2027, the 15-year agreement with Uttar Pradesh Power Corporation Ltd. (UPPCL) positions this as a cornerstone for managing peak demand and integrating intermittent renewables.

Competitive Yet Context-Specific Tariffs Amid Falling Costs

From an economic standpoint, the approved tariffs represent a balanced outcome in a market where BESS costs have plummeted dramatically. The bidding process, initiated in February 2025, attracted 21 participants offering a cumulative 3395MW/13580MWh—over nine times the tendered capacity—demonstrating robust competition. Post e-reverse auction, the L1 tariff of Rs. 3.59 lakh/MW/month is notably higher than late-2025 discoveries, such as Andhra Pradesh's record low of Rs. 1.48 lakh/MW/month for 2-hour standalone BESS. However, this project's early-2025 timing and 4-hour duration explain the premium, as global battery prices fell by 20-30% throughout the year, enabling subsequent tenders to achieve sub-Rs. 2 lakh levels.

Converting to per-kWh terms (assuming 1.5 cycles/day as per market trends), the effective cost hovers around Rs. 2.8-3.0/kWh—competitive with recent solar tariffs (Rs. 2.5/kWh average) and far below 2022-23 levels of Rs. 10/kWh. For UPPCL, this translates to optimized power purchase costs: BESS will store off-peak renewable energy (often curtailed) and discharge during peaks, potentially saving Rs. 1-2/kWh compared to thermal peaking power. The VGF subsidy—capped at Rs. 46 lakh/MWh or 30% of capex under the first tranche—has been instrumental in bridging viability gaps, reducing effective tariffs by 20-40%.

The trading margin, while debated (UPPCL initially proposed 0.5% of capacity charges), was justified by precedents from SECI, NHPC, and NTPC. CERC regulations limit it to 2 paise/kWh without payment security, but SJVN's escrow mechanisms enable the higher 7 paise, adding minimal burden (Rs. 0.07/kWh on discharge) while compensating the intermediary's risks.

Metric	Project Tariff (Rs./MW/Month)	Market Low (Late 2025)	Effective Cost/kWh (1.5 Cycles/Day)	Savings vs. Thermal Peaking
Patel Infrastructure	3,59,000	1,48,000 (APTRANSCO)	~2.8	Rs. 1-2/kWh
Enerica Infra	3,59,999	1,65,000 (MSEDCL)	~2.8	Rs. 1-2/kWh

Overall, India's BESS market is projected to explode from USD 1.54 billion in 2025 to USD 8.59 billion by 2031 (CAGR 33.2%), driven by falling lithium-ion costs (down 33% in 2025) and economies of scale. For Uttar Pradesh, with peak demand exceeding 30GW and RE penetration at ~15%, this project could reduce curtailment by 4-5% annually, yielding economic benefits of Rs. 500-700 crore/year in avoided losses.

Aligning with National Ambitions and VGF Evolution

Policy-wise, UPERC's approval exemplifies seamless alignment with MoP's 2022 BESS Guidelines, emphasizing TBCB for transparency and cost discovery. The VGF scheme, expanded in 2025's second tranche to 30GWh with Rs. 5,400 crore support (Rs. 18 lakh/MWh cap), has been a game-changer, mandating 20% domestic content to boost local manufacturing. This project's VGF utilization (under the CPSU component) highlights how subsidies de-risk investments, enabling tariffs 35-40% lower than non-subsidized bids.

Uttar Pradesh's policy ecosystem further amplifies impact: The state's 2022 RE Policy targets 22GW solar by 2027, but intermittency has led to 3-5% curtailment. BESS addresses this by enabling "on-demand" RE, supporting national goals like 500GW non-fossil capacity by 2030 (requiring 236GWh storage per CEA estimates). Regulatory enablers, such as ISTS charge waivers till 2028 and ESO mandates (0.5-0.75% in states like Maharashtra), create a conducive environment. However, challenges persist: Delays in financial closure (no VGF disbursed in FY25 due to this) underscore the need for streamlined approvals and risk-sharing mechanisms.

Critically, while politically expedient (e.g., avoiding inter-state sales scrutiny), the intra-state focus limits economies from national pooling. Substantiated by IESA data, BESS could reduce UP's coal dependency (70% of mix) by 10-15% by 2030, cutting emissions by 20-25 million tons CO2e/year—aligning with India's NDC commitments but requiring bolder inter-state policy harmonization.

Market Dynamics: Competition, Innovation, and Future Outlook

Market analysis reveals a hyper-competitive landscape: 2025 saw 102GWh tendered (1.4x 2024), with 60GWh for standalone BESS, attracting 50+ new entrants. This project's 21 bidders (cumulative 9x oversubscription) reflect maturing supply chains, with tariffs dropping 33% for 2-hour systems. Projections indicate installed capacity surging 10x to 5GWh in 2026 from 507MWh in 2025, per IESA, fueled by revenue stacking (arbitrage + ancillaries) and hybrid models.

Key players like Tata Power (commissioning India's largest solar-BESS) and Ola (entering via gigafactories) signal diversification. Lithium-ion dominates (92% share), but flow batteries gain for longer durations. Off-grid segments grow fastest (CAGR 36.9%), aiding rural electrification. Risks include import dependency (70% cells from China) and financing hurdles for low-tariff projects (DSCR >1.4x needed).

For Uttar Pradesh, BESS enhances RE integration (solar ramps 15-20GW daily), reducing transmission congestion and enabling EV charging hubs. Market value could hit USD 19.4 billion nationally by 2035 (CAGR 24.3%), with UP capturing 10-15% share via local incentives.

In conclusion, UPERC's approval isn't just a tariff nod—it's a catalyst for economic savings, policy execution, and market maturation. As India eyes net-zero by 2070, scaling BESS like this will be crucial, though success hinges on timely implementation and adaptive regulations. Stakeholders must prioritize domestic manufacturing and hybrid tenders to sustain momentum.

UPERC’s approval of the 375MW/1500MWh standalone BESS tariff under the VGF scheme marks a watershed moment for India’s energy transition. Economically, the competitive tariffs of ₹3.59 lakh/MW/month reduce storage costs to around ₹2.8–3/kWh, enabling UPPCL to cut peak power purchase costs by 15–20% while reducing dependence on thermal generation. Uttar Pradesh’s intra‑state model minimizes transmission losses and offers a replicable pathway for states.

Ajay Mishra, Director General, Renewable Energy Society of India (RESI)

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