India’s electricity tariff regime is on the cusp of a major transformation as the Central Electricity Regulatory Commission (CERC) has issued a draft notification proposing the formal inclusion of Energy Storage Systems (ESS) into tariff determination for thermal power plants and interstate transmission systems.
Issued on December 1, 2025, the draft amends the CERC Tariff Regulations, 2024 and introduces — for the first time — a supplementary tariff structure exclusively for energy storage systems. The move is expected to accelerate adoption of Battery Energy Storage Systems (BESS) by utilities while strengthening grid flexibility and renewable integration across India’s power sector.
Storage Gets Its Own Tariff Identity
Under the draft framework, any coal-, lignite- or gas-based generating station or transmission system deploying an integrated ESS will be allowed to recover costs through a separate supplementary tariff, independent of the principal asset tariff.
The tariff will consist of two components:
- Supplementary Fixed Storage Charges based on Annual Fixed Cost (AFCess)
- Supplementary Energy Charges based on the source of charging electricity, adjusted for system efficiency and auxiliary consumption
This regulatory clarity establishes ESS as a standalone commercial asset class, removing uncertainty that has historically held back large-scale deployment by utilities.
CERC Sets Uniform Technical Norms for Storage Performance
To standardise tariff calculations and operational expectations, CERC has proposed the following baseline assumptions for all integrated ESS installations:
- Useful Life: 12 years
- Normative Round-Trip Efficiency: 85%
- Availability Factor: 90%
- Auxiliary Energy Consumption: 5%
In a key regulatory safeguard, CERC mandates that billing efficiency shall be the higher of normative or actual performance, discouraging underperformance and penalising inefficient design.
Incentives for High-Performance Systems
To promote best-in-class performance, the Commission has introduced an incentive provision:
- ₹0.25 per kWh will be paid for energy discharged beyond the level corresponding to the normative round-trip efficiency.
For transmission-linked ESS, eligible incentive revenue will be retained by the transmission licensee, reinforcing the role of storage as both a grid reliability and revenue-generating asset.
Guaranteed 14% Return on Equity for ESS Capital
Recognising storage as infrastructure, CERC proposes a base Return on Equity of 14% on capital invested in ESS as additional expenditure within existing thermal or transmission projects.
This aligns storage returns with core generation and transmission assets and significantly improves bankability for public utilities, IPPs, and transmission operators evaluating ESS retrofits.
O&M Cost Structure Defined
ESS operating expenditure has been formally normed:
- O&M Cap: 2% of admitted capital cost
- Annual Escalation: 5.25% (first two years)
- Maintenance Spares: 20% of O&M cost
By defining cost recovery mechanisms upfront, utilities gain predictable lifecycle budgeting — a key enabler for multi-site deployments.
Flexible Charging Sources, Market-Linked Energy Costs
The framework allows charging energy to be sourced from:
- The associated generating station
- Other utility-owned plants
- Renewable generators
- Power exchanges and open markets
Energy charges will be computed after adjusting for:
- Round-trip losses
- Auxiliary consumption
This provision enables generators and grid operators to optimise charging strategies based on price signals and grid conditions.
NLDC to Frame Ramp-Rate Standards
Operational performance of ESS will be monitored through ramp-rate metrics, with guidelines to be issued by the National Load Dispatch Centre (NLDC). This will integrate ESS responsiveness into national grid control protocols — a critical step toward institutionalising storage in system operations.
Priority Right of Discharge Assigned to Beneficiaries
In a critical consumer-protection clause, CERC clarifies:
- Beneficiaries shall have the first right over energy discharged from ESS, except when system security requires otherwise.
This ensures storage is deployed primarily for system value and consumer reliability, not speculative trading.
What This Means for India’s Battery Storage Market
The draft rules represent one of the largest regulatory unlocks for India’s storage ecosystem to date.
Impact Outlook:
- Accelerates ESS deployment in thermal fleets
- Brings transmission utilities into the BESS market
- Improves project bankability through regulated returns
- Unlocks private and public investment into grid-scale storage
- Creates demand visibility for battery manufacturers and EPCs
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