By S&S Co. Advocates & Solicitors · Published 13 August 2026 · Informational content, not legal advice. See our disclaimer
Why Storage Needs Its Own Regulatory Treatment
Battery Energy Storage Systems (BESS) do not fit neatly into the generator, transmission licensee, or distribution licensee categories the Electricity Act, 2003 was originally built around: a storage asset can both draw power from the grid (to charge) and inject power back into it (to discharge), and can be co-located with a renewable generator or stand alone as an independent asset. Regulators at both the central and state level have been progressively issuing specific guidance to address this dual character.
Procurement Models
BESS capacity is being procured in India principally through two models: standalone battery storage tenders, where developers bid to supply firm, dispatchable capacity independent of any specific generation source, and storage capacity bundled with a renewable generation project, aimed at converting variable renewable output into a firmer, more schedulable supply profile. Each model carries a different risk and revenue structure, and the choice materially affects project financing terms.
Viability Gap Funding for Storage
Recognising that standalone battery storage remains capital-intensive relative to its current revenue-generating capability, the central government has extended viability gap funding (VGF) support to battery storage projects procured through competitive bidding, aimed at bridging the gap between project cost and what current storage-service tariffs can support: developers relying on VGF should build the scheme's specific eligibility and disbursement conditions into their bid economics from the outset.
Regulatory Treatment of Charging and Discharging
A recurring regulatory question is how charging energy drawn by a storage asset should be treated for open-access, wheeling and cross-subsidy surcharge purposes, since a storage asset both consumes and supplies power. Central and state regulators have been issuing clarifications on this point, generally distinguishing storage charging from ordinary consumption for surcharge purposes where the storage asset is being used to firm up renewable supply, though the treatment is not yet fully uniform across states.
Interconnection and Safety Standards
BESS installations, particularly at grid scale, are also subject to interconnection standards set by the Central Electricity Authority and applicable state transmission or distribution utilities, alongside fire-safety and technical standards specific to battery chemistry and installation: developers should confirm the applicable technical standards early in project design, since retrofitting for compliance after installation is considerably more costly than designing for it upfront.
Frequently Asked Questions
Why doesn't BESS fit neatly into existing electricity licensing categories?
Because a storage asset both draws power from the grid to charge and injects power back to discharge, unlike a pure generator, transmission licensee or distribution licensee, requiring regulators to issue specific guidance for its dual character.
How is battery storage capacity typically procured in India?
Through standalone battery storage tenders for firm, dispatchable capacity, or through storage capacity bundled with a renewable generation project to firm up variable output.
Is viability gap funding available for battery storage projects?
Yes. The central government has extended VGF support to battery storage projects procured through competitive bidding, subject to the scheme's specific eligibility and disbursement conditions.
How is charging energy for a storage asset treated for surcharge purposes?
Regulators have generally been distinguishing storage charging from ordinary consumption for open-access and cross-subsidy surcharge purposes where the storage firms up renewable supply, though treatment is not yet fully uniform across states.
References & Further Reading
This article references the following statutory provisions. Readers should always verify current rules, fees and timelines against the applicable statute and rules as amended, since these are revised from time to time.
- Electricity Act, 2003, as applied to storage assets through regulatory guidance and clarifications.
- Ministry of Power and Ministry of New and Renewable Energy guidelines on battery energy storage procurement and viability gap funding.
- Central Electricity Authority technical and interconnection standards applicable to storage installations.