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					</table>As India’s energy storage market matures, battery energy storage developers say power purchase agreement (PPA) tenures need greater flexibility than the customary 20-25-year contracts used for solar and wind projects.
Contract duration could range from five to 15 years for many storage projects, depending on cycling requirements, degradation, augmentation needs, warranties, and the underlying revenue model.
Shorter contracts can reduce developers&#8217; exposure to long-term technology and performance risks, but could result in higher tariffs and financing costs if projects lack sufficient revenue visibility beyond the initial PPA.
India <a href="https://www.mercomindia.com/indias-battery-storage-additions-jump-84-fold-to-8-2-gwh-in-1h-2026" target="_blank" rel="noopener">added</a> 8.2 GWh of battery energy storage capacity in the first half of 2026, nearly 84 times the 98.4 MWh installed during the same period last year, according to Mercom India Research’s Q2 and 1H 2026 India’s Energy Storage Landscape Report,
Cumulative installed battery energy storage capacity reached 9.3 GWh at the end of June 2026, with standalone systems accounting for 83% of installed capacity.
<a href="https://mercomindia.s3.ap-south-1.amazonaws.com/wp-content/uploads/2026/10/Picture1energystorage.png"><img loading="lazy" decoding="async" class="aligncenter wp-image-106327 size-full" src="https://mercomindia.s3.ap-south-1.amazonaws.com/wp-content/uploads/2026/10/Picture1energystorage.png" alt="" width="903" height="445" srcset="https://mercomindia.s3.ap-south-1.amazonaws.com/wp-content/uploads/2026/10/Picture1energystorage.png 903w, https://mercomindia.s3.ap-south-1.amazonaws.com/wp-content/uploads/2026/10/Picture1energystorage-300x148.png 300w, https://mercomindia.s3.ap-south-1.amazonaws.com/wp-content/uploads/2026/10/Picture1energystorage-768x378.png 768w, https://mercomindia.s3.ap-south-1.amazonaws.com/wp-content/uploads/2026/10/Picture1energystorage-650x320.png 650w, https://mercomindia.s3.ap-south-1.amazonaws.com/wp-content/uploads/2026/10/Picture1energystorage-624x308.png 624w, https://mercomindia.s3.ap-south-1.amazonaws.com/wp-content/uploads/2026/10/Picture1energystorage-600x296.png 600w" sizes="auto, (max-width: 903px) 100vw, 903px" /></a>
Battery Usage Could Determine PPA Tenure
Unlike solar and wind projects, battery degradation is closely linked to how intensively the asset is used. Higher cycling accelerates degradation and can increase augmentation or replacement requirements, making the operating profile a key factor in determining contract tenure.
While industry executives broadly supported greater flexibility in storage contract tenures, views differed on the appropriate duration.
Ayush Misra, Co-Founder and CEO at <a href="https://amperehourenergy.com/?gad_source=1&amp;gad_campaignid=24273354231&amp;gbraid=0AAAABD7JG-vrmUlNpMwcO3UtNWYE2QzSO&amp;gclid=CjwKCAjwifjVBhBKEiwAYx4K9CsbSJqTYqRnn9n6318EBIUtz-yqkWwMmYcXSTV2PFBU1lDZolQI8RoCWsgQAvD_BwE" target="_blank" rel="noopener">AmpereHour Energy</a>, said a BESS operating one cycle per day could potentially support a 20-25-year contract. However, two or more cycles per day increase cell degradation, making shorter contracts of around 12-15 years more suitable.
Arman Puri, Director at <a href="https://hindustanpower.in/" target="_blank" rel="noopener">Hindustan Power</a>, agreed that standalone storage projects could be better suited to 12-to-15-year contracts, allowing degradation, augmentation, and replacement costs to be estimated with greater certainty.
Saurabh Jain, CEO-Energy Storage at <a href="https://www.geon-energy.com/" target="_blank" rel="noopener">GEON</a>, suggested exploring five-to-10-year contracts, while Parveen Jangra, Founder, CTO and COO at <a href="https://orianapower.com/" target="_blank" rel="noopener">TrueRE Oriana Power</a>, cited 10-15 years as an appropriate range.
Faruk G Patel, Founder and CMD at <a href="https://www.kpigreenenergy.com/" target="_blank" rel="noopener">KPI Green Energy</a>, said seven to 10 years could better align contracts with typical warranty periods, reducing developers&#8217; exposure to performance risks.
He added that some markets are also experimenting with tiered or stepped-tenure structures, where capacity payments adjust at defined intervals, offering a middle path between long-term revenue certainty and shorter-term flexibility.
Shilpy Dewan, Chief Business Officer at <a href="https://www.serenticaglobal.com/" target="_blank" rel="noopener">Serentica Renewables</a>, cautioned against prescribing a standard tenure, saying battery technology, degradation, cycling requirements, warranties, financing, and the underlying revenue model should determine the contract duration.
Shorter Contracts Could Raise Tariffs
Shorter PPAs can reduce developers&#8217; exposure to long-term technology and degradation risks. However, they also shorten the period over which developers can recover their investment.
“Tenure alone solves nothing. A shorter contract recovers the same capital over fewer years, which means a higher tariff, faster amortization and tighter debt cover,” Puri said.
Industry executives said faster capital recovery could translate into higher tariffs or capacity payments and require more aggressive debt repayment. Financing costs could also increase if lenders assign limited value to revenues beyond the contracted period.
Developers must therefore account for degradation, augmentation, and potential battery replacement within the contracted period. PPAs should clearly define performance requirements, cycling limits, degradation trajectories, augmentation obligations, and replacement responsibilities..
Jangra emphasized that the contract period should align with warranted performance, expected degradation, and augmentation or replacement economics rather than treating the warranty period as the economic life of the BESS.
However, Jain believes shorter PPAs provide an opportunity to re-contract the asset based on prevailing market conditions, technology, and its remaining performance after the initial contract expires.
Revenue Stacking Could Support Shorter Contracts
Higher capital recovery requirements under shorter PPAs could be partly offset if developers can generate revenue from services beyond the primary contract.
BESS assets can potentially participate in energy arbitrage, ancillary and balancing services, peak-demand management, renewable energy integration, and other grid-support applications.
“The broader opportunity is to move from viewing a battery purely as an energy-delivery asset to recognizing it as a multi-service grid asset,” Jain said.
Patel said shorter contracts could allow developers to reassess market conditions after the initial PPA and pursue contract renewals, merchant market participation, or ancillary services.
However, a shorter PPA does not by itself create additional revenue. Contracts must allow developers to use battery capacity and cycling capability not committed to the primary offtaker for other services.
Dewan said BESS&#8217; inherent flexibility enables participation in multiple applications, including energy arbitrage and ancillary services.
Bankability Hinges on Revenue Visibility
The ability to generate multiple revenue streams can improve project economics, but it also creates a financing challenge because lenders generally place greater value on predictable, contracted cash flows.
“Shorter PPAs should not come at the cost of bankability,” Dewan said.
Stakeholders noted lenders would assess not only contract duration but also offtaker strength, technology warranties, degradation assumptions, augmentation plans, contractual protections, and visibility into additional revenues.
According to Misra, lenders will increasingly need to evaluate the project&#8217;s full revenue stack and lifecycle management strategy, not just PPA tenure.
Puri said developers should also retain rights to operate BESS assets after the contract expires, including access to the site and grid connection. Such rights could allow lenders to assign residual value to the project rather than assuming that its value falls to zero when the PPA expires.
The bankability of shorter contracts will therefore depend on whether revenue certainty during and after the PPA is sufficient to support debt repayment and establish a credible residual value for the asset.
Market Reforms Could Support Shorter PPAs
The viability of shorter PPAs depends partly on developing deeper markets for storage services.
Executives highlighted the need for greater clarity around ancillary services, energy arbitrage, scheduling, settlement, resource adequacy, and revenue stacking.
Puri said India&#8217;s merchant revenue pools are not yet sufficiently deep to fully support residual BESS value, with ancillary services markets still developing and arbitrage revenues dependent on electricity price spreads.
He emphasized that greater flexibility over cycling could expand developers&#8217; ability to monetize BESS assets beyond the primary contract. Under such a structure, an offtaker could contract only the capacity and cycling window it requires, such as during the evening peak, while the developer retains the ability to use the remaining capacity for ancillary services or arbitrage. Part of the additional value could also be shared with the offtaker.
Developers also highlighted the need for greater standardization of performance parameters, degradation assumptions, and augmentation obligations in storage tenders and contracts.
As ancillary and merchant markets deepen, revenues beyond the initial PPA could become more predictable, making shorter contracts easier to finance. Until then, storage PPAs will need to balance shorter-tenure flexibility with the long-term revenue certainty that lenders require.

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