Ministry of Power Notifies Rules to Expand Energy Storage Systems Ownership and Usage
The Ministry of Power has amended Rule 18 of the Electricity Rules, 2005, formally recognising Energy Storage Systems (ESS) as independent infrastructure assets, opening the door for wider ownership, flexible business models, and a competitive storage market in India.
September 22, 2025. By Mrinmoy Dey
As per the new rules, ESS can function independently or be integrated with generation, transmission, or distribution networks, marking a significant shift in how storage is positioned in India's power ecosystem.
The amended rules recognise that ESS may be developed, owned, leased, or operated by a range of stakeholders, including generating companies, transmission or distribution licensees, consumers, system operators, or independent energy storage service providers. This expansive scope signals the government’s intent to democratise participation in energy storage and promote business model innovation.
The amendment unlocks a multi-sided market. ESS owners can now sell, lease, or rent storage capacity – in whole or in part – to any consumer, utility, Load Despatch Centre, or other entity, creating diverse and bankable revenue streams. This provision is likely to facilitate the emergence of storage-as-a-service models, enable capacity monetisation, and spur the growth of a competitive energy storage market in India.
Importantly, the ESS will inherit the legal status of its owner, allowing for regulatory clarity in its treatment under Indian electricity law. A key provision further clarifies that even when an ESS is not co-located with the asset it supports – such as a generation plant or distribution network, but remains owned and operated by it, it shall still retain the owner’s legal status.
However, for operational purposes like scheduling and dispatch, such ESS installations will be treated as independent storage elements.
ESS are key to achieving India’s 500 GW renewable energy target by 2030 by storing surplus green power, reducing curtailment, and providing ancillary services like frequency regulation for grid stability.
For financially stressed DISCOMs, ESS offers a way to manage peak loads, lower power purchase costs, and enhance supply reliability. Until now, regulatory uncertainty has stalled large-scale ESS investment, but new clarity on ownership, market access, and commercial models is set to unlock confidence for both domestic and global investors.
The benefits span the entire value chain: generators and IPPs can firm up renewables and tap ancillary revenues; transmission and distribution utilities gain tools for grid management and congestion relief; independent ESS providers find a new market for storage-as-a-service; C&I consumers can cut costs and improve reliability as active prosumers; and investors finally have the framework needed to back this high-growth sector.
These changes are expected to play a crucial role in shaping policy around the integration, operation, and regulation of energy storage systems, which are increasingly seen as essential for grid stability, renewable integration, and peak demand management.
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