Battery Energy Storage Systems (BESS) In India: A Legal And Regulatory Insight

Posted On - 11 June, 2025 • By - Jidesh Kumar

India’s transition to a sustainable and resilient energy economy necessitates the deployment of enabling infrastructure, with Battery Energy Storage Systems (BESS) forming an essential component of this strategy. BESS facilities, whether co-located with renewable energy generation units or independently situated (non-co-located), play a critical role in enhancing grid reliability, optimizing renewable energy integration, and offering firm power solutions. This article presents a legal and regulatory perspective on the evolving policy framework governing BESS in India.

Policy Rationale and Strategic Imperative

In light of the Central Electricity Authority’s (CEA) projections and the National Electricity Plan (2023), India is expected to require approximately 35 GWh of BESS capacity by 2026–27, scaling to over 1,800 GWh by 2047. This anticipated demand is driven by the need to balance intermittent generation, facilitate peak load management, and support ancillary grid services.

From a regulatory standpoint, BESS contributes to multiple functional areas:

  • Frequency Regulation and Grid Support: Enables real-time frequency balancing and voltage regulation.
  • Demand Side Management: Allows deferral of capacity additions and reduces dependency on peaking assets.
  • Ancillary and Reserve Services: Supports secondary and tertiary reserve provision.
  • Market Participation: Facilitates time-shifting, arbitrage, and capacity trading.
  • End-User Benefits: Assists commercial and industrial consumers in improving energy quality and resilience.

Recent Policy Development: Ministry of Power Notification – 10 June 2025

The Ministry of Power (MoP), through its order dated 10 June 2025, extended the 100% waiver of Inter-State Transmission System (ISTS) charges for BESS projects that are co-located with renewable generation facilities and commissioned on or before 30 June 2028.

It is pertinent to note that the aforementioned waiver does not extend to BESS installations that are geographically independent from generation sources (non-co-located systems).

Such projects, while still eligible for various regulatory incentives under previous MoP and Central Electricity Regulatory Commission (CERC) frameworks, are not covered under the extended ISTS waiver scheme.

MoP Guidelines of 2022 under Section 63 of the Electricity Act, 2003

The MoP, pursuant to its authority under Section 63 of the Electricity Act, 2003, issued detailed guidelines in 2022 for the procurement of energy from BESS. The guidelines, which are technology-agnostic and location-neutral, provide the following salient features:

  • Thresholds for Deployment: A minimum of 50 MW for inter-state systems and 1 MW for intra-state systems is prescribed.
  • Open Charging Framework: Systems may draw electricity from both renewable and conventional sources.
  • Revenue Enabling Provisions: The guidelines promote BESS participation in ancillary markets and provide revenue stability through standardized bidding processes.
  • Procurement Structuring: Emphasis is laid on transparent tendering and bankable contract structuring for utility and developer engagement.

These guidelines apply equally to both co-located and non-co-located storage facilities, thereby reinforcing regulatory neutrality.

Regulatory Recognition under CERC Ancillary Services Regulations, 2022

 The CERC, through its Ancillary Services Regulations (2022), formally recognized BESS as a market participant in grid services. This enables such systems to offer the following regulated services:

  • Primary and Secondary Frequency Control
  • Spinning and Non-Spinning Reserves
  • Reactive Power and Voltage Regulation

This inclusion allows BESS operators to monetize their assets through participation in regulated grid support markets, thereby improving return on investment for both developers and investors.

CEA and MoP Advisory – February 2025

In February 2025, the CEA issued a technical advisory recommending the integration of a two-hour duration BESS, sized at a minimum of 10% of solar project capacity, for all new solar tenders. This advisory was later endorsed by the MoP and communicated to various Renewable Energy Implementing Agencies (REIAs) for compliance.

 This policy initiative, while significant, is limited in scope. It applies solely to future solar generation projects and does not impose any mandatory co-location requirements for previously commissioned or independently deployed BESS assets.

Although current incentives such as the ISTS waiver favour co-located systems, non-co-located BESS projects continue to enjoy substantial regulatory legitimacy. The key legal considerations for such projects include:

  • Location Flexibility: Systems may be sited strategically close to demand centers or substations, enhancing transmission efficiency.
  • Independent Operation Models: Developers may establish BESS as standalone facilities offering storage-as-a-service.
  • Participation in Multiple Markets: Non-co-located systems remain eligible for capacity, frequency response, and ancillary services markets.
  • Contractual Versatility: Power Purchase Agreements (PPAs) and Energy Storage Service Agreements (ESSAs) may be customized to accommodate diverse customer requirements.

Industry Outlook and Future Considerations

The commercial viability of BESS in India continues to improve, with capital costs for lithium-ion systems reported to have declined to approximately US$55 per kWh as of mid-2025. Concurrently, reverse auctions for hybrid renewable-plus-storage projects have yielded competitive tariffs in the range of ₹3.10 to ₹3.50 per unit.

 From a legislative standpoint, several states have also introduced tailored incentives to promote storage deployment. For instance, Andhra Pradesh’s 2025 policy targets 25 GWh of BESS capacity by 2030 and offers fiscal and regulatory support, including land allotment and duty waivers.

Conclusion:

In conclusion, India’s regulatory framework for BESS is steadily maturing, balancing economic imperatives with technical reliability. While the recent MoP notification offers enhanced incentives for co-located installations, the broader legal landscape remains conducive for the development of non-co-located storage systems. With consistent policy evolution, investor-friendly regulations, and increasing stakeholder interest, BESS is poised to become a foundational asset in India’s clean energy transition.

Contributed by – Nivedita Bhardwaj