CERC's new framework integrates energy storage into India’s power system as a regulated asset.
It has defined technical norms, tariff mechanisms and operational rules.
The draft removes long-standing uncertainty, enabling large-scale investment and improving grid flexibility.
In a decisive regulatory shift, the Central Electricity Regulatory Commission (CERC) on December 1, 2025 issued a new draft, containing a detailed framework for Integrated Energy Storage Systems (IESS), giving India’s energy storage sector the clarity it has lacked for nearly a decade.
The draft notification amending the CERC Tariff Regulations, 2024 formally recognises storage as a regulated asset within both generating stations and the inter-state transmission system, signalling that energy storage is no longer an experimental add-on for renewable balancing but a core component of India’s future grid architecture.
Until now, energy storage had no dedicated treatment in India’s central tariff regulations. Developers faced uncertainty on how storage attached to thermal plants or transmission assets would be priced, depreciated, operated or compensated. Banks hesitated, utilities stayed cautious, and pilot projects proliferated without a clear path to scale. This lack of regulatory structure increasingly conflicted with India’s rapidly rising renewable share and the grid’s growing need for flexibility, ramping support, peak-shaving capacity and congestion mitigation.
CERC’s new framework, which is open for comments until the end of this month, resolves that vacuum with precision. It defines an integrated storage system, lays out its technical parameters, and embeds storage across the tariff-determination process. By doing so, it places storage on the same regulatory footing as generation and transmission assets — a long-pending demand of utilities, developers and system operators.
At its core, the framework, which is titled as the ‘Central Electricity Regulatory Commission (Terms and Conditions of Tariff) (Second Amendment) Regulations, 2025’, introduces supplementary tariff mechanisms specifically for IESS, allowing cost recovery through supplementary fixed storage charges and energy charges. These must be filed within 30 days of commercial operation, ensuring rapid regulatory visibility for investors.
To standardise performance expectations, the framework specifies normative operational benchmarks:
85 per cent round-trip efficiency,
90 per cent availability,
5 per cent auxiliary consumption, and
12-year depreciation for battery assets.
These norms reduce the uncertainty that has long deterred lenders, allowing them to treat storage more like any other regulated infrastructure.
CERC further permits charging from multiple sources — the host plant, another generator, the grid during high-frequency periods, or the open market — with energy charges computed accordingly. This flexibility enables more efficient utilisation of surplus energy and supports multi-use-case business models.
Importantly, the amendment explicitly empowers transmission licensees to instal grid-side storage for reliability enhancement and transmission deferral. Any revenues from storage services must flow back into reducing annual transmission charges, while the licensee can retain incentives for performance above normative round-trip efficiency.
The operational framework is equally significant. Beneficiaries receive the first right of discharge, barring system security needs. Regional Power Committees will develop the detailed scheduling, dispatch and energy accounting rules, aligning storage operations with the new Grid Code.
Recognising that storage can participate in multiple markets — peak support, ancillary services, congestion relief, merchant discharge — the notification outlines a revenue-sharing mechanism. Gains after meeting fixed and variable storage costs will be split 50:50 between the generator and beneficiaries, while transmission-side gains will reduce the annual transmission charges. This ensures that economic benefits are equitably shared without distorting incentives.
The framework also sets norms for additional capitalisation, requiring cost-benefit analysis, impact on tariffs, and prudent cost assessments before approval. Operation and management expenses are fixed at 2 per cent of capital cost, escalating annually for the first two years.
Beyond tariff norms, CERC has opened a Regulatory Sandbox, permitting generating companies and transmission licensees to test innovative technologies, business models or grid-edge solutions. Costs up to 0.5 per cent of annual fixed cost or Rs 100 crore are eligible — a rare regulatory recognition that storage technologies are evolving and require room for experimentation.
India, which has already added 50 per cent of 500 GW of non-fossil fuel capacity, is entering a decade where renewable penetration will rise sharply and the country’s grid will need unprecedented flexibility. While standalone storage tenders have grown, they operate mainly under contractual structures rather than asset-based regulation. Thermal plants are struggling to run flexibly, and transmission corridors face increasing congestion. Without storage integrated into the regulatory core, India risked slowing its energy transition.
By embedding storage into the tariff code, CERC has taken a foundational step toward unlocking utility-scale investment, enabling coal plants to operate more flexibly, strengthening the transmission system, and expanding the commercial viability of storage beyond renewable integration, according to experts.
“The notification broadens the role of ESS in India — enabling storage to be deployed at thermal plants, within transmission networks, for congestion management, and as a reliability asset. It sets the foundation for scaling commercially viable storage to support India’s evolving grid,” Netra Walawalkar, co-founder and vice-president of Netzero Energy Transition Association, said in a LinkedIn post.