The Central Electricity Regulatory Commission (CERC) has issued a new notification dated March 20, 2026, introducing the Terms and Conditions of Tariff (Second Amendment) Regulations, 2026. This move is seen as an important step toward modernizing India’s power sector by bringing energy storage systems into the existing regulatory framework for thermal power plants and interstate transmission networks.
A key highlight of the amendment is the introduction and formal recognition of Integrated Energy Storage Systems (IESS). These systems are designed to work alongside generating stations or transmission systems to improve grid reliability and support flexible operations. By storing electricity and releasing it when required, IESS can help balance demand and supply more efficiently. The regulation also states that such systems can help delay or avoid the need for costly transmission infrastructure in the future.
The rules clearly include lithium-ion battery-based storage systems as part of IESS. These systems have been assigned a useful life of 15 years under the new framework. This provides clarity to developers and investors regarding long-term planning and cost recovery. With energy storage becoming a key part of renewable energy integration, this step is expected to encourage wider adoption of such technologies in India.
To address the financial aspects, CERC has introduced a supplementary tariff structure for these storage systems. Power generators and transmission companies will need to apply for this tariff within 90 days from the date of commercial operation of the storage system. The tariff is divided into two components. The first is the Supplementary Fixed Storage Charges, which cover the annual fixed costs and are calculated with a base Return on Equity of 14 percent. The second is the Supplementary Energy Charges, which include the cost of electricity used to charge the storage system. This cost is adjusted based on the Round Trip Efficiency, which must be at least 85 percent, along with auxiliary energy consumption.
The regulations also provide flexibility in sourcing electricity for charging the storage systems. Companies can use surplus power from their own plants, procure electricity from other generating stations, or purchase it from the open market. At the same time, priority is given to using storage systems to maintain the technical minimum operation of generating units, ensuring stable and continuous power supply to beneficiaries.
For existing projects, the amendment introduces a transparent and consultative approach. If a generating company plans to add an energy storage system, it must first share the proposal with its beneficiaries. These stakeholders are given 30 days to respond before the company can seek in-principle approval from the Commission. This ensures that both costs and benefits, including improved grid stability, are properly assessed.
The notification also includes changes related to integrated coal and lignite mines. It introduces a mechanism to share gains if production exceeds planned targets and clarifies how input fuel prices will be calculated for cost recovery. While most provisions come into effect immediately after publication, certain mine-related rules have been applied retrospectively from April 1, 2024.
Overall, this amendment reflects a significant policy shift, encouraging the integration of energy storage with conventional power systems and supporting a more reliable and efficient electricity grid in India.
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