Emerging Opportunities in Battery Energy Storage: A Smallcap Investment Watchlist

Battery Energy Storage Stocks: A Smallcap Watchlist
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Energy cannot be created or destroyed; it only changes form. This principle, often learned in school, is now transforming how we power our homes, cities, and economies. In India, solar and wind energy are becoming central to the country’s energy landscape. In FY25, India added an impressive 34 gigawatts (GW) of power capacity, with a remarkable 29.5 GW coming from renewable sources, primarily solar and wind. The total installed renewable capacity in the country now approaches 220 GW, with the government aiming for 500 GW by 2030.

However, there’s a significant challenge: nature doesn’t adhere to our schedules. The sun doesn’t shine at night, and the wind doesn’t blow consistently. This creates a substantial opportunity in the energy sector: energy storage. To convert intermittent renewable energy into a reliable power source, we must find a way to store the energy produced. The solution lies in Battery Energy Storage Systems (BESS). Without BESS, the rise of green energy could remain merely a concept. These systems capture excess electricity when it is available and store it for use during peak demand. They enable buildings with solar panels to utilize their own energy at night, alleviate stress on the grid during surges in demand, and stabilize voltage and frequency on the power grid. Without energy storage, the transition to renewables could face significant obstacles.

India is aware of this necessity. Every new solar project in the country now mandates the inclusion of co-located energy storage, with enough battery capacity to store at least two hours’ worth or 10% of the installed solar capacity. Thus, energy storage has become integral and mandatory.

But are BESS projects financially feasible? The answer is increasingly affirmative. The cost of lithium-ion batteries, which power most BESS, has significantly decreased in recent years. Innovations, improved supply chains, and mass production have made these systems more affordable. Additionally, the government is backing this initiative, offering viability gap funding to cover up to 30% of capital costs for storage projects.

What does this mean for the market? A vast potential for growth. India’s National Electricity Plan targets 47 GW of battery energy storage by 2032, compared to the current installed capacity of just 300 MW. This represents a projected growth of over 150 times within less than a decade. Industry experts suggest that by 2030, the Indian BESS market could reach US$ 32 billion, growing at a compound annual growth rate of 27%.

This shift is already evident in the market. Established companies in power generation and renewable energy are either entering or expanding their storage portfolios. Key players include Tata Power, JSW Energy, Adani Green, NHPC, KPI Green Energy, Sterling & Wilson, and Acme Solar.

Interestingly, less obvious companies are also making significant moves. For instance, Advait Infratech, which primarily operates in telecom and power transmission infrastructure, has announced plans to develop 1 GW of battery energy storage projects over the next five years. Bondada Engineering, a small but agile player, has emerged as the lowest bidder for a BESS project for Telangana GENCO, valued at Rs 2.4 billion, and is pursuing a pipeline of projects totaling Rs 10 billion. For IEX, energy storage enhances its significance, allowing energy to be charged and discharged at optimal times, increasing liquidity on exchanges and potentially boosting transaction volumes.

Other players, such as Jupiter Wagons, known for manufacturing rail freight wagons, are diversifying into electric mobility and have received orders for comprehensive battery storage systems. Quality Power Electrical Equipments recently acquired a majority stake in STATCON Energiaa, a domestic power electronics manufacturer that offers BESS. Himadri Specialty Chemicals is focusing on key lithium-ion battery materials and boasts backward integration, providing a rare advantage in this sector. Similarly, PCBL is developing ultra-conductive battery chemicals and is contributing to the establishment of a local supply chain for battery materials. These companies may not be traditional energy giants, but they are positioning themselves for future opportunities.

For investors, this signals potential. However, as with any significant opportunity, there are risks to consider. Technological disruptions and various cell chemistries pose challenges, as does the fact that China produces around 75% of lithium-ion batteries, exposing the market to geopolitical and supply chain risks. While government policies are currently supportive, they could change, and scaling BESS projects involves execution risks.

Nonetheless, this emerging space is worth monitoring. It may soon become as essential as the energy it stores. The ideal time to pay attention is not when everyone is already involved but when the pieces are just starting to align. That moment is now for BESS. Stay vigilant.