Electricity Amendment Rules 2025: Rule 18 & Energy Storage

By – Devank Maheshwari and Rohan Singh

Table of Contents

Introduction

Why Energy Storage Systems (ESS) Needed Legal Recognition

For years, Energy Storage Systems (ESS) suffered regulatory neglect. Although vital to integrating renewables, ESS was undefined in law. That changed with the 2022 amendments to the Electricity Rules, 2005 (Electricity Rules), which inserted Rule 18, giving ESS recognition in the power system. Now, with the Electricity (Amendment) Rules, 2025 (2025 Amendments) notified, Rule 18 has been recast given the rapid evolution of Indian power sector. This notification, commonly referred to as the Electricity Amendment Rules 2025, marks a major step in ESS regulation. Rule 18 speaks comprehensively about what storage is, who can own it, how it is treated legally, and how it should interact with the grid.

ESS is a part of growing energy storage solutions in India. As renewable energy grows, its variability creates challenges for grid stability. ESS bridge this gap by storing surplus electricity when it is abundant and releasing it when demand peaks, effectively turning infirm renewables into firm power. 

Rule 18 Today: Legal Architecture of ESS

How Energy Storage Systems Are Positioned in the Power Sector

This provision, often referred to as Rule 18 Energy Storage Systems, anchors storage firmly within India’s electricity law. Under the Electricity Rules, 2005¹ (“Electricity Rules”), Rule 18 (introduced via amendments in 2022) established the regulatory framework for Energy Storage Systems in India. Rule 18 clarifies where do ESS fit in the power supply chain in India. It represents one of the first comprehensive steps toward structured ESS regulation in India. As the adoption of ESS grows in India, this clarity is necessary for investment decisions as well as future regulation making. 

Recognition as Part of the Power System

Mainstreaming ESS under the Electricity Act

Rule 18 begins by placing storage squarely within the ambit of the “power system” as defined under Section 2(50) of the Electricity Act, 2003 (Electricity Act). This essentially signals mainstreaming of ESS in energy infrastructure. This recognition is critical as only the elements the “power system” would fall within the jurisdiction of electricity regulators and can interact with the grid. 

Modes of Use: Independent and Integrated

Flexibility in ESS Deployment Models

ESS may be deployed in two ways: independently, as a standalone facility, or integrated with generation, transmission or distribution assets. This allows maximum flexibility. This language also dispels the previous notion that ESS is merely as network support device. 

Legal Status Depends on the Owner

Ownership Defines the Licensing and Treatment of ESS

Perhaps the most interesting part of Rule 18 is how it deals with the legal status of an ESS. Rather than creating a new licensing category, the rules state that storage would mirror the legal identity of its owner. If a generator owns a battery, it is part of generation. If a DISCOM owns one, it is part of distribution. If a consumer owns one, it is treated as part of that consumer’s system. And if an independent company owns a standalone ESS, it is a de-licensed generation.

This approach avoids the trappings of over-regulation of a new licensed activity. It also places well within the existing regulatory architecture. 

Ownership and Operation of ESS

2025 Amendment: Inclusion of Consumers as Owners

This is where the 2025 Amendment made the most visible change. Earlier, only generating companies, transmission licensees, distribution licensees, system operators, and independent ESS providers were explicitly listed as owners and operators of ESS. Now, consumers are also added to the list. This inclusion marks a significant shift toward encouraging consumer-owned energy storage at both industrial and household levels. This is critical is it allows industrial and commercial establishments to invest in their own batteries, and paves way for household and community storage in the future. The ownership palette now stretches across the entire electricity ecosystem.

Co-located vs non-co-located ESS

How Location Affects Scheduling and Dispatch

If an ESS is co-located and operated by its owner (for instance, a solar plant with batteries on site), then the ESS is treated as part of that owner’s infrastructure. But if the ESS is not co-located, for instance, a DISCOM owning a battery, or a consumer owning a battery farm at another site, it still retains the legal identity of the owner. The catch, however, is that for scheduling and dispatch purposes, it must be treated as a separate storage element. 

Commercialization of ESS Capacity

Storage-as-a-Service and Market Monetisation

Rule 18 empowers any ESS developer or owner to sell, lease, or rent out capacity, in whole or in part. The potential buyers include generators, transmission and distribution companies, load despatch centres, consumers, and even “any other person.” This provision recognizes storage-as-a-service. In fact, the concept of storage-as-a-service India could create new business models across sectors. An ESS can be sliced up and monetised across multiple users. 

De-licensed but Registered

Lower Entry Barriers with Grid Visibility Requirements

Rule 18 provides that independent, standalone ESS is a de-licensed activity, just as generation. This framework underlines the growing recognition of de-licensed energy storage India as an investment opportunity. This lowers the entry barrier for investments. However, such ESS must register with the Central Electricity Authority (CEA) and have their capacity verified. This registration ensures the grid visibility.

Why the 2025 Amendments Matter

Market Structure and Investment Models

New Pathways for Investment and Participation

Rule 18 now legitimises multiple business models such as independent storage providers, DISCOM-led storage, consumer-owned batteries, and third-party leasing etc. Investors can think of batteries as assets that can be sliced and monetised. 

The 2025 Amendment creates a more open and competitive market structure for energy storage. By broadening ESS ownership and usage rights to virtually all stakeholders (including consumers and independent operators), the rules envisage “democratizing participation in energy storage”. As the Electricity Rules allow storage capacity in whole or part to be traded, partial ownership or leasing arrangements can be modelled that can reduce upfront cost barriers. We may see joint ventures or leasing companies emerge that specialize in providing storage to others. It is also investment friendly as no separate license is required. 

Mainstreaming Consumer-Owned ESS

From Passive Buyers to Active Energy Managers

However, the most important change is the recognition of Consumers as the owners of ESS. Industrial and commercial consumers have long been dependent on diesel generators or costly peak power. Now, they can directly own storage. They can arbitrage tariffs, firm up rooftop solar, or even lease capacity to others. 

This also means that large consumers can invest in captive ESS projects, either on-site or even at a remote location, to manage their energy needs. In practice, some consumers might shift from passive buyers to active power managers, altering traditional load profiles. This decentralization of energy resources follows the trend seen with rooftop solar and can usher in specialized forms of renewable energy storage systems.

Impact on Utilities and Grid Stability with BESS

Evolving Roles for DISCOMs, Generators, and Grid Operators

This part of the Electricity Amendment Rules 2025 highlights the importance of grid stability with ESS in managing variability from renewables. Generators and DISCOMs still retain the right to own and use storage, but they will now operate in a more competitive ecosystem. If consumers start managing peaks on their own, DISCOMs’ revenue models will shift. We are increasingly seeing bundling of storage with supply. Similarly, grid operators will need to evolve scheduling and dispatch protocols for ESS. As fleets of batteries are being established, the recognition that storage is a separate dispatchable element becomes even more critical.

It promotes a grid where many nodes can simultaneously generate, consume, and store energy. This aligns with the broader renewable energy storage policy India is shaping to integrate distributed resources. This is in line with global trends of moving toward Distributed Energy Resources (DER) integration. In fact, by empowering “prosumers” with storage, India is taking a step toward the concept of virtual power plants and aggregated supply models, which can aggregate many small resources to act like a big power plant, for ease of grid interaction. This reflects the emergence of consumer prosumers energy storage in the Indian market landscape.

Regulatory Recognition

Operational Questions Still Await Clarity

The regulations might have been clarified, but the process has just begun. The law de-licenses storage, but regulators still must sort out the plumbing- metering, settlement, deviation charges, open access treatment etc. There are still a lot of questions looming, those presumably will be ironed out at the level of Appropriate Commission. For instance, will the consumer owned off site storage require new banking rules? How will regulators handle multi-use storage (part regulated, part commercial) in accounting and tariffs? The Electricity Rules have set the base, but the operational regulations must catch up. If a Load Despatch Centre operates a battery, perhaps to maintain grid frequency, who approves that investment or expense?

Conclusion

The broader renewable energy storage policy India context shows how consumer-owned and de-licensed storage is becoming integral to electricity law. The 2025 Amendment may not have massively hit the headlines, but it quietly recasted the place of ESS in electricity law. Where storage was once seen as an adjunct, it is now a consumer resource, tradable service/ product, apart from being essential for grid stability, given the growth trajectory of renewables. With massive integration of ESS incoming, regulators, DISCOMs, and markets, generally, must adapt quickly to make ESS work. By updating Rule 18, especially with the inclusion of consumers and the flexibility in usage models, we have formally acknowledged energy storage as a key piece of modern power systems, while creating a more enabling environment for its deployment.

FAQs

References –

1. Electricity Rules, 2005

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