Regulatory Streamlining for Renewables and Grid Stability: ESG BROADCAST shares key takeaways.
In a move to accelerate the nation’s Energy Transition, the Central Electricity Regulatory Commission (CERC) of India issued a new draft framework for Integrated Energy Storage Systems (IESS) on December 1, 2025. This draft, presented as the ‘Central Electricity Regulatory Commission (Terms and Conditions of Tariff) (Second Amendment) Regulations, 2025,’ fundamentally resolves a decade-long regulatory vacuum surrounding the pricing, operation, and compensation of energy storage assets. By formally recognizing storage as a regulated asset—applicable to both generating stations and the inter-state transmission system—CERC signals that energy storage is now a core, indispensable component of India’s grid architecture, rather than just an auxiliary tool for renewable balancing.
The previous lack of dedicated tariff regulations for storage created significant uncertainty for developers, utilities, and financial institutions, hindering large-scale investment necessary for deep renewable integration. The new CERC framework provides the essential clarity needed for regulatory streamlining. It specifically defines an integrated storage system, lays out clear technical parameters, and embeds storage across the entire tariff-determination process. This action places IESS on the same regulatory footing as traditional generation and transmission assets, addressing a long-standing demand from the industry.
The framework introduces supplementary tariff mechanisms crucial for cost recovery, specifically allowing for fixed storage charges and energy charges. These must be filed within 30 days of commercial operation, ensuring rapid financial visibility for investors. To standardize quality and performance, CERC specifies normative operational benchmarks, including 85% round-trip efficiency, 90% availability, and a 12-year depreciation schedule for battery assets. These norms mitigate financial uncertainty, allowing lenders to assess storage assets akin to conventional infrastructure.
CERC has also introduced operational flexibility by permitting IESS to charge from multiple sources, including the host plant, other generators, the grid during favorable frequency periods, or the open market. This flexibility supports multi-use business models crucial for maximizing economic return. Furthermore, the amendment explicitly empowers transmission licensees to install grid-side storage for reliability enhancement and transmission deferral. Revenues generated from these services must be channeled back to reduce the annual transmission charges, thus benefiting end consumers.
A key component of this overhaul is the establishment of a revenue-sharing mechanism. Recognizing storage’s ability to participate in various markets—ancillary services, peak support, and congestion relief—gains exceeding fixed and variable costs will be split 50:50 between the generator and the beneficiaries. This ensures equitable sharing of economic benefits while preserving commercial incentives for developers. Additionally, CERC created a Regulatory Sandbox, allocating capital for generating and transmission licensees to test innovative storage technologies and business models, acknowledging the rapid evolution of Energy Storage.
Strategic significance lies in the framework’s direct link to India’s aggressive Energy Transition goals, particularly the target of 500 GW of non-fossil fuel capacity. By providing clear rules for Energy Storage integration, CERC has unlocked the potential for utility-scale investment, which is essential for managing the intermittent nature of high renewable penetration. This regulatory certainty will enable existing thermal plants to operate more flexibly and strengthen the entire transmission system, significantly reducing the risk of grid instability and accelerating commercial viability across India’s power sector.
