The Electricity (Amendment) Rules, 2025 explained: New rules for energy storage systems
Introduction
The Ministry of Power has issued amendments[1] to the Electricity Rules, 2005 that took effect from September 19, 2025. The amendments address the use and ownership of energy storage systems and place storage within the regulatory framework that governs electricity supply and grid operation. Under the amended text, an energy storage system may operate on its own or be integrated with generation, transmission, or distribution infrastructure. The rules expand who may develop, own, lease, operate, or rent storage capacity and allow storage capacity to be offered to consumers, utilities, load despatch centres, or others. The changes set out how storage can enter the power system and how owners may make storage available to third parties.
Explanation
The amendment substitutes language in Rule 18 of the Electricity Rules, 2005 so that storage can function on its own or together with other power assets. Where a storage unit is located with a generating station, a transmission facility, a distribution facility, or a consumer facility, the storage will assume the status of the owner under the law. Where a storage unit is owned by an entity but is not located with the primary facility of that owner, the owner’s status under the law will still apply for ownership and compliance, while the storage will be treated as storage for purposes such as scheduling, dispatch and coordination with the load despatch centre. This structure separates questions of ownership and compliance from operational treatment in system management.
The amended rule lists the categories of entities that may develop, own, operate, lease, or rent storage. The list includes generating companies, transmission licensees, distribution licensees, consumers, system operators and independent energy storage service providers. By naming consumers and service providers, the rule allows behind-the-meter systems and third-party projects to enter the market. A consumer may install storage for its own use and may also make unused capacity available to others under lease or rental arrangements. A service provider may build a storage project and allocate parts of its capacity to different users under contract.
The amendment gives owners and developers an explicit basis to sell, lease or rent storage capacity in whole or in part to any consumer, to utilities that engage in generation, transmission or distribution, to load despatch centres, or to other persons. That provision creates a contract foundation for business models where storage capacity is offered as a service, where capacity is traded, or where a user pays for availability or for specific usage rather than for ownership of the entire system. The language makes room for arrangements in which storage revenue derives from contractual access rather than only from a single owner’s internal use.
The rules stop short of prescribing market procedures, metering standards, settlement mechanics or tariff treatment. Items such as how storage will bid into markets, how payments will flow between multiple parties, how losses and round-trip efficiency will be accounted for, and how metering and telemetry will be deployed remain matters for the Central Electricity Regulatory Commission, state electricity regulatory commissions and system operators. The amendment creates the ownership and use framework while leaving the detailed operational and market rules to follow in regulator orders and system operator procedures.
On the operational side, grid management will need changes to handle storage that may be owned by multiple parties or leased in parts. Scheduling, forecasting and dispatch tools must record and allocate capacity use, while metering and telemetry must capture who used which portion of storage at what time. Settlement systems must account for energy in, energy out, and loss adjustments across contracts. For project finance, the rule provides a contractual basis for revenue streams tied to lease or service contracts, but project bankability will depend on contract design, demand for capacity, credit arrangements and the implementation rules set by regulators and operators.
State-level alignment will also matter. Electricity law in India involves central legislation and state implementation. For storage models that span state boundaries or depend on state tariffs and grid access rules, state commissions must reflect the amended framework in orders, tariff schedules and grid codes. Until those steps occur, some models for sale, lease or rental of capacity may require specific approvals or may face timing constraints tied to state processes.
The amendment sits alongside other government measures that affect storage economics, such as transmission charge waivers for eligible projects and support for battery manufacturing and deployment. Those measures and the amended Rule 18 together change the legal and commercial landscape for storage, but they do not remove the need for clear contracts, risk allocation, technical standards and operational procedures that enable storage to provide services to the grid and to third parties.
Conclusion
The amended rules place energy storage within the rulebook for electricity supply and grid operation by allowing storage to operate on its own or with other power assets, by widening the set of entities that may develop and own storage, and by permitting sale, lease or rental of storage capacity to third parties. The amendment creates a legal basis for storage to serve system needs and to be offered as a contracted service, while leaving technical, market and tariff details to regulators and system operators.
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