Almost every conversation about batteries in India starts from the same assumption: a battery is a kind of generator. It buys cheap power, sells expensive power, and its business case is the gap between the two.
That assumption quietly excludes the use that may matter most to the grid. A battery can also be a piece of wires — a substitute for the line, transformer or substation that would otherwise have to be built. In that role it does not sell anything. It earns the way a transformer earns: by being in the rate base, recovered through transmission charges, and by saving the network the cost of an upgrade it no longer has to make.
India’s rules now allow exactly that, and the first projects are in the market.
A battery has no legal identity of its own
The starting point is a piece of drafting that sounds dry and turns out to be the whole story.
Under Rule 18 of the Electricity Rules, as amended by the Electricity (Amendment) Rules, 2022, an energy storage system is treated as part of the power system — and it takes its legal status from its owner. If a generating company owns and co-locates it, the storage has the status of generation. If a transmission licensee owns it, the storage has the status of transmission. If a distribution licensee owns it, distribution.
Two consequences follow, and both are important:
- The same hardware is three different assets. A 300 MWh container yard does not change physically when a transmission company buys it instead of a developer. What changes is which regulatory box it sits in, who pays for it, and what it is allowed to earn.
- Standalone storage is delicensed. A developer building storage on its own does not need a generation licence, which removed one of the early obstacles to the sector getting started.
So the answer to “can a battery be a transmission asset in India” was, in principle, yes from 2022 onward. What was missing was the tariff machinery to actually recover the cost. That arrived at the end of 2025.
What CERC’s December 2025 amendment changed
The Central Electricity Regulatory Commission (CERC) — the regulator for interstate transmission and central generation — notified its Terms and Conditions of Tariff (Second Amendment) Regulations on 1 December 2025. It introduced a term worth knowing: the Integrated Energy Storage System (IESS), meaning storage co-located with a generating station or a transmission system and connected to a common bus, used for grid reliability, transmission deferral, or flexible operation.
The substance for our purposes:
- Transmission licensees are explicitly empowered to install grid-side storage for reliability enhancement and transmission deferral. This is the sentence that turns a theoretical legal status into a buildable asset class.
- Transmission-side revenues reduce annual transmission charges. If the storage earns anything, the benefit flows back to the users who are paying for the network, not to the licensee as profit.
- Gains are shared 50:50 between the generator and the beneficiaries, after fixed and variable storage costs are met, where storage sits at a generating station.
- Batteries get a 12-year depreciation life, which for the first time gives a lender and a regulator a common number to work from.
- Performance norms are specified: minimum 85% round-trip efficiency, minimum 90% availability, and 5% auxiliary consumption.
- A regulatory sandbox allows costs up to 0.5% of annual fixed cost, or ₹100 crore, to be spent on testing innovations.
- Supplementary tariff filings must be made within 30 days of commercial operation.
There is also a related set of proposals in motion — CERC’s fifth amendment to the interstate transmission connectivity rules, aimed at easing connectivity and reducing the bank guarantee burden for storage projects. Those are proposals, so treat them as direction of travel rather than settled law.
The mechanism: why a battery can stand in for a line
The logic is easier to see than to describe. A transmission element — a line, a transformer, an interconnecting bay — is sized for its worst few hours of the year. For the remaining several thousand hours it is comfortably within its rating. When load growth pushes those worst hours past the limit, the conventional answer is to build more capacity, sized again for a handful of hours.
A battery placed downstream of the constraint attacks the problem from the other end. During the evening peak it discharges locally, so the power does not have to travel across the constrained element at all. During the solar middle of the day, when the same corridor has spare headroom, it recharges. The peak flow comes down; the upgrade can wait.
Note what the green line does at midday: it goes up. Charging adds load to the corridor. That is the honest version of this story — storage does not reduce energy flow, it reschedules it into the hours when the network has room. Which is also why the siting study matters more than the battery specification, and why connectivity and general network access rules determine whether a given location is even usable.
Why timing is the real argument
On cost alone, a battery is not automatically cheaper than conductor. Where it wins is the calendar.
| Conventional line or transformer upgrade | Storage at the constrained substation | |
|---|---|---|
| Lead time | Several years — survey, right-of-way, approvals, construction | Months. POWERGRID’s tenders specify a 15-month completion period |
| Land and right-of-way | A corridor across many landholdings | A compact yard inside the existing substation boundary |
| Sizing risk | Fixed at build. Oversize and it sits idle; undersize and you rebuild | Modular. Containers can be added as the constraint grows |
| If load growth disappoints | Stranded asset | Relocatable, or redeployed to another service |
| Useful life | Decades | 12 years in CERC’s depreciation schedule; augmentation extends it |
| Other benefits | Capacity only | Voltage support, frequency response, ride-through during disturbances |
The asymmetry in the first row is the point. A deferral is valuable even if the line eventually gets built, because it buys the years in which load growth becomes clearer and the upgrade can be sized to what actually happened rather than to a forecast.
The last row matters too. A battery installed for transmission deferral is also, incidentally, a fast-responding resource that helps with grid stabilisation on every ordinary day. That stacking is part of why the economics work, though under CERC’s framework much of that benefit flows to network users through reduced transmission charges rather than to the asset owner.
What is actually being built
This has moved past consultation papers.
POWERGRID has tendered a 150 MW / 300 MWh system at the 400/220 kV Kalikiri substation in Andhra Pradesh. It is part of a larger 1,000 MW / 2,000 MWh programme in that state, procured through tariff-based competitive bidding with viability gap funding routed through the Power System Development Fund (PSDF).
Separately, POWERGRID has floated two tenders totalling 750 MW / 2,000 MWh — a 500 MW / 1,000 MWh two-hour system under Category A, and a 250 MW / 1,000 MWh four-hour system under Category B. The structure is build, own, operate, with POWERGRID procuring on behalf of its wholly owned subsidiary POWERGRID Energy Services Limited (PESL), which retains ownership. The completion period is 15 months, followed by a 12-year comprehensive maintenance obligation.
Read those two Category definitions together and you can see the framework doing its job. A two-hour system is a capacity and peak-relief asset. A four-hour system at the same MW rating is an energy-shifting asset. A transmission planner choosing between them is making a duration decision of exactly the kind we cover in two-hour versus four-hour storage, except the driver is corridor loading rather than a tariff spread. Live tenders of this kind, as they appear, are listed in our tender tracker.
The gaps a developer should know about
Being honest about what is not yet settled:
- There is no separate “transmission deferral” product you can bid into. The enabling status and the tariff treatment exist. What does not exist is a standing market where a developer offers deferral value and gets paid a defined price for it. You participate by winning a licensee’s tender.
- Deferral value is not paid to the developer. The saving accrues to the network and its users. A developer’s return comes from the tender’s own capacity payment, not from a share of the avoided line.
- Siting is decided by someone else. The commercial value of this asset class is overwhelmingly locational, and the location is chosen by the licensee’s planning studies. That narrows the addressable opportunity considerably compared with merchant storage.
- Interstate and intrastate rules differ. CERC’s framework governs interstate transmission. A state transmission utility works under its own State Electricity Regulatory Commission, and the tariff treatment of licensee-owned storage varies. Our state-by-state policy guides are the place to start for a specific state.
Policies, tender terms and tariff regulations in this area change by notification — CERC’s connectivity amendments were still at proposal stage as of September 2026 — so verify current terms against the latest CERC, Ministry of Power and state commission notifications before committing to a bid or a design.
What this means for you
If you are a transmission or distribution licensee, the regulatory permission you were waiting for is in place, and the interesting work is now planning rather than policy. The question to run through your system studies is which constrained elements have a peak sharp enough and narrow enough that a two- to four-hour battery meaningfully defers the upgrade. Elements that are loaded for twelve hours a day are a wires problem; elements that breach their rating for three hours on a hundred evenings a year are a storage problem.
If you are a developer, treat this as a distinct market from merchant and tender-based storage rather than a variation of it. The counterparty is a licensee, the contract is long and availability-based, the revenue is a capacity payment rather than a spread, and the availability norm — 90% under CERC’s regulation — is what your operations and maintenance plan has to be built around. Container-class systems such as the ADESS 6500 are the relevant hardware at this scale, arrayed into grid blocks sized to the corridor rather than to a tariff arbitrage.
If you are a large industrial or C&I buyer, this mostly explains something you have experienced rather than something you will buy. If your connection request has been held up because the upstream network is constrained, licensee-owned storage is one of the tools that may unblock it — and separately, storage on your own side of the meter is the fastest route to living within a constrained connection instead of waiting for it to be reinforced.
If a network constraint, a connection delay or an evening peak is the problem you are actually trying to solve, the useful first step is a load and constraint profile rather than a product choice. Talk to our team and we will work through what the site genuinely needs.
Policy and tender snapshot as of September 2026. Indian storage regulation is moving quickly through CERC, Ministry of Power and state commission processes; verify current notifications before design, bidding or investment decisions.