The government is taking several steps to strengthen grid stability and promote energy storage systems as India increases its dependence on renewable energy sources. According to the National Electricity Plan (Generation) notified in May 2023, the country will require significant growth in Battery Energy Storage System (BESS) and Pumped Storage Plant (PSP) capacity over the coming years to manage the variability of renewable energy and ensure reliable power supply.
The projected requirement for BESS capacity is estimated at 8.68 GW/34 GWh by 2026-27 and is expected to rise to 47.24 GW/236 GWh by 2031-32. Meeting this requirement is expected to involve an investment of around Rs 3.49 lakh crore by 2031-32. Similarly, PSP capacity is projected to increase to 7.45 GW/47 GWh by 2026-27 and 26.69 GW/175 GWh by 2031-32, requiring an estimated investment of about Rs 1.29 lakh crore.
A report by NITI Aayog titled “Sectoral Insights: Power (Vol. 7)” released in February 2026 highlighted that energy storage will become a critical requirement for managing fluctuations caused by renewable energy integration. To support this transition, the government has introduced a combination of policy, regulatory, market, and manufacturing measures to encourage the development of energy storage technologies.
Several regulatory changes have been introduced to establish energy storage as an important part of the power sector. The Electricity Rules were amended in December 2022 to recognize Energy Storage Systems (ESS) as an integral component of the electricity system, allowing their participation in generation, transmission, and distribution activities. In the same year, ESS was included in the Harmonised Master List of Infrastructure, helping projects access long-term and affordable financing.
The government also issued guidelines for resource adequacy planning by state utilities in June 2023, where energy storage was included as a key resource for meeting peak demand and improving grid reliability. A National Framework for Promotion of Energy Storage Systems was introduced in September 2023 to provide a roadmap for storage deployment, market integration, and regulatory support.
To improve safety and technical standards, the Central Electricity Authority (CEA) notified amendments related to safety requirements for BESS and construction standards for storage projects. These measures aim to ensure the safe and efficient expansion of energy storage infrastructure.
On the demand side, the government has introduced incentives and market reforms. The Inter-State Transmission System (ISTS) charge waiver has been extended for eligible BESS and PSP projects to reduce project costs and encourage investment. Storage-based resources have also been allowed to provide ancillary services, helping maintain real-time grid balance.
Tariff-Based Competitive Bidding guidelines for procurement of BESS and PSP projects have created a transparent mechanism for large-scale storage development. Energy storage has also been promoted as a cleaner alternative to diesel generator sets for backup power. BESS participation in the High-Price Day-Ahead Market has enabled storage projects to respond to peak power demand and price signals.
The government is providing Viability Gap Funding for the development of 43.8 GWh of BESS capacity. Closed-loop off-stream PSP projects have also been exempted from the requirement of Central Electricity Authority concurrence, helping speed up project development.
To strengthen domestic manufacturing, the Ministry of Heavy Industries is implementing a Production-Linked Incentive (PLI) scheme with an outlay of Rs 18,100 crore for establishing 50 GWh of Advanced Chemistry Cell manufacturing capacity. Of this, 10 GWh is allocated for grid-scale stationary storage.
Additional support has been provided for hydro PSP projects, while regulatory changes have enabled separate grid connectivity during non-solar hours. This will help integrate more renewable energy and shift stored electricity to evening and night-time demand periods.
The government has also expanded ownership opportunities by allowing energy storage systems to be developed, owned, leased, or operated by consumers. The CEA has recommended co-location of storage systems with solar projects, suggesting storage capacity of at least 10% of installed solar capacity for a minimum duration of two hours.
These measures are expected to accelerate India’s energy storage ecosystem, improve grid reliability, support renewable energy growth, and help the country meet its future electricity demand securely.
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