India: Government Likely to Introduce Energy Storage Procurement Mandate for Discoms by March 2027
Key facts
- The government plans to mandate state discoms to procure energy storage capacity as part of renewable power purchases by March 2027
- Power Secretary Pankaj Agarwal stated that regulations for the storage mandate will be finalized within three months of the announcement
- Proposals under consideration include storage capacity equivalent to 10 percent or 20 percent for two-hour durations, though final requirements are pending
- The Union Cabinet approved a 14,500 crore rupee viability gap funding scheme to support the deployment of grid-scale energy storage
- India currently relies on coal-fired plants for evening and night-time demand despite having over 300 GW of non-fossil fuel capacity
New Delhi, Nov 6 (KNN) The government plans to mandate state power utilities and electricity distribution companies (discoms) to procure energy storage capacity as part of their renewable power purchases, a move aimed at reducing electricity shortages during evening and night-time hours and improving grid reliability.
Power Secretary Pankaj Agarwal announced the proposed requirement at the Bharat Renewable Energy Summit in New Delhi on Thursday. He stated that the government is working to finalize the regulations by March 2027, with stakeholder consultations and the issuance of notifications expected to be completed within three months.
The requirement is expected to apply to licensed utilities, while renewable energy developers will also be subject to mandatory storage integration norms.
Storage Requirements Yet to Be Finalised
Agarwal stated that the government was reviewing minimum storage requirements, with proposals under consideration for storage capacity equivalent to 10 percent and 20 percent for two-hour durations. However, the final requirement and implementation timeline have yet to be determined.
The existing advisory requiring renewable energy developers to integrate storage is also expected to be converted into mandatory regulations.
This initiative aims to address the growing mismatch between renewable energy generation and electricity demand. Although India has more than 300 gigawatts (GW) of non-fossil fuel-based power generation capacity, it continues to rely on coal-fired plants to meet demand during evening and night-time hours, when solar generation declines.
₹14,500-Crore Storage Support Scheme
The proposed mandate follows the Union Cabinet's approval of a 145,000 crore rupee viability gap funding (VGF) scheme to support the development of 92 gigawatt-hours (GWh) of grid-scale energy storage capacity between FY27 and FY31.
The programme will support 60 GWh of pumped hydro storage projects, 30 GWh of battery energy storage systems and 2 GWh of emerging storage technologies. The projects are expected to attract total investments of around 976,000 crore rupees.
Public and private sector discoms will be eligible for financial support for battery storage and pumped hydro projects. The scheme also introduces a minimum domestic content requirement of 40 per cent for battery energy storage projects to encourage local manufacturing and reduce dependence on imported components.
MSME Impact
The proposed mandate could create new business opportunities for micro, small and medium enterprises (MSMEs) engaged in battery manufacturing, electrical equipment, power electronics, engineering and related services as India expands its energy storage infrastructure.
The domestic content provision could particularly benefit Indian MSMEs supplying battery components, electrical systems, control equipment and other inputs to storage projects, provided they meet the applicable technical and quality standards.
The government estimates that the additional capacity supported by the scheme will help India move towards its requirement of 411 GWh of grid-scale energy storage by 2031-32.
Pvola take
This regulatory shift creates a guaranteed offtake channel for storage developers, as discoms will be legally required to procure capacity alongside renewable energy. The mandated integration norms remove market uncertainty for investors by establishing a clear compliance-driven demand baseline. Developers should prioritize projects that align with the proposed two-hour duration specifications to secure early positioning in this expanding market segment.
Frequently asked questions
When does the Indian government plan to finalize regulations for mandatory energy storage procurement by discoms?
The government aims to finalize the regulations by March 2027. Stakeholder consultations and notifications are expected to be completed within three months of the announcement.
What are the proposed storage capacity percentages for two-hour durations under the new Indian mandate?
Proposals under consideration include storage capacity equivalent to 10 percent and 20 percent for two-hour durations. The final requirement and implementation timeline have yet to be determined by the authorities.
How does the 145,000 crore rupee VGF scheme support India's 411 GWh storage target for 2031-32?
The scheme provides viability gap funding to support additional grid-scale storage capacity. It is estimated to help India move towards its requirement of 411 GWh of storage by 2031-32.