If you have worked on solar in India, you know how a power purchase agreement works: the plant generates, a meter counts the units, and the buyer pays a tariff per unit.
Try applying that to a battery and it falls apart immediately. A battery does not generate anything. It takes energy that already exists, holds it, and gives most of it back later. Paying it per unit discharged would mean paying it to hand you back your own electricity — minus the bit it lost on the way.
So storage is contracted differently.
What a capacity contract actually buys
A tolling agreement — or capacity contract, or in Indian tender documents a battery energy storage purchase agreement — buys the use of the machine. The offtaker pays a fixed monthly fee for every megawatt of power capacity, and in exchange gets to decide when the battery charges and when it discharges.
The tariff is quoted in ₹ lakh per MW per month, and it is payable regardless of how much the battery was actually dispatched.
This transfers dispatch risk to the procurer — usually a distribution company or a state agency — and removes volumetric uncertainty for the owner. Whether the buyer uses the battery every day or twice a week, the monthly cheque is the same.
Why the market settled on this
Because it is financeable. A lender can underwrite a fixed monthly payment from a creditworthy offtaker over a twelve- to fifteen-year term. A lender cannot easily underwrite market spreads that vary by season and compress as competitors enter.
That difference shows up directly in how much debt a project raises — the arithmetic is in our guide to how lenders look at storage. Almost every large standalone tender in India now runs on a build-own-operate model with a capacity charge for exactly this reason, as we set out in how to bid a BESS tender.
What the tariffs have actually been
Discovered capacity tariffs have fallen quickly:
| Tender | Scale | Discovered capacity charge |
|---|---|---|
| GUVNL, Gujarat (2026 award) | 450 MW / 900 MWh | around ₹2.3 lakh/MW/month |
| APTRANSCO (December 2025) | 1,000 MW standalone | about ₹1.48 lakh/MW/month — a record low at the time |
Several forces pushed those numbers down at once: falling cell prices, viability gap funding on many tenders (see the VGF scheme explained), fierce competition among bidders, and an expectation that uncontracted capacity can earn merchant revenue alongside.
That last point matters, and it is worth understanding properly.
Capacity can be sliced
A tolling contract need not commit the whole battery to one user. The SECI–GUVNL arrangement approved in Gujarat is the clearest published example of a split:
- 30% of capacity for ancillary services to the national grid operator
- 40% retained as merchant capacity by the developer
- 30% — 150 MW / 300 MWh — offered to distribution companies
Under that agreement, the amount chargeable from GUVNL was reduced by ₹444,444 per MW per month, leaving an effective price of about ₹644,473 per MW per month for the contracted capacity.
This is revenue stacking written into the contract itself rather than left to daily optimisation — and it explains how bidders justify tariffs that look thin against a fully contracted asset. Part of the return is expected to arrive from somewhere else.
What to read carefully before signing
- The availability definition. How is it measured, over what window, and what deductions apply? This is the product, so it is where the money is.
- Who supplies charging energy, and who absorbs the round-trip efficiency loss. On a 20-year asset, that assumption is worth a lot.
- Degradation and augmentation obligations. If you must hold contracted capacity flat for fifteen years, you are committing to augmentation at your own cost, at prices nobody knows yet.
- Cycle limits. Most contracts cap cycles per year. Exceeding them affects your degradation guarantee even if the offtaker asked for the dispatch.
- Payment security, given that the counterparty is often a distribution company.
What this means for you
- If you are a developer or IPP: the capacity charge is not the whole return, and bids that look aggressive usually assume merchant upside on uncontracted capacity. Model it explicitly, and be honest with yourself about whether that upside is contracted or hoped for.
- If you are a distribution company or large procurer: a tolling structure gives you a dispatchable resource without owning batteries, but you take dispatch risk and usually the charging energy cost. Model those before comparing tariffs across tenders.
- If you are a C&I buyer: this structure is not really for you. Behind the meter you own the asset and capture the savings directly, which is simpler — see standalone storage and our ADESS 5000 container system.
- If you are watching the market: live tenders and awards are tracked on our tender tracker, and our team can talk through a specific bid with you — get in touch.
Tender terms, discovered tariffs and contract structures change with every notification and every auction, and the figures above are point-in-time observations. Treat this as an August 2026 snapshot and verify the current terms in the actual tender document before bidding.