India to Mandate Energy Storage for Power Utilities by March to Curb Renewable Curtailment — November 5, 2026

The Union Ministry of Power announced plans to mandate that all licensed electricity distribution companies (DISCOMs), including state-owned utilities, procure energy storage capacity as part of their power procurement portfolios. The regulatory push is aimed at arresting the widespread curtailment of solar and wind generation and ensuring reliable power supplies during peak evening demand hours.

Speaking at the Bharat Renewable Energy Summit in New Delhi, Union Power Secretary Pankaj Agarwal stated that the government expects to finalize the formal regulations by March. While the exact volume of storage capacity that state distributors must contract is currently being calculated, the mandate will turn previous government advisories into binding obligations.

Tackling Clean Energy Wastage

The policy intervention comes amid mounting grid and transmission bottlenecks that have forced system operators to curtail significant clean energy generation. Solar generation peaks during daylight hours when industrial and domestic demand patterns do not always align, while wind generation fluctuates sharply with seasonal weather.

Without adequate grid-scale battery systems or pumped hydro facilities to absorb surplus generation, substantial clean power is discarded. Industry data reveals that approximately 11% of solar power generated across India during the hottest months this year was lost to grid curtailments, even as peak national power demand broke historical records. Research firm JMK Research & Analytics estimated that grid constraints, demand-generation mismatches, and inadequate battery flexibility forced curtailments of as much as 118.6 GW of renewable capacity in September alone.

Backed by ₹14,500 Crore Viability Gap Funding

The impending distribution mandate follows closely on the heels of the Union Cabinet approving a ₹14,500 crore Viability Gap Funding (VGF) scheme to develop 92 gigawatt-hours (GWh) of grid-scale energy storage systems over the period from FY 2026–27 to FY 2030–31.

The government's storage funding framework entails:

• Capacity Distribution: Funding support for 60 GWh of hydro Pumped Storage Plants (PSP), 30 GWh of Battery Energy Storage Systems (BESS), and 2 GWh of alternative emerging storage technologies.
• Investment Leverage: An estimated total capital expenditure of ₹97,600 crore to be mobilized through tariff-based competitive bidding.
• Domestic Content Rule: A minimum Domestic Content Requirement (DCR) of 40% on BESS projects to encourage domestic cell and battery manufacturing ecosystems.

In tandem with utility procurement rules, the Central Electricity Authority (CEA) has proposed mandating that renewable project developers co-locate storage equal to at least 10% of installed solar and wind capacity, with a minimum duration of two hours, starting July 1, 2027.

Implications for Indian Markets and Utilities

For power distribution companies, mandatory storage procurement introduces near-term tariff adjustments but provides a crucial hedge against volatile spot-market power purchases during expensive peak evening hours.

For investors tracking Dalal Street, the policy transition provides direct revenue visibility for:

• Battery and Storage EPC Players: Listed electrical equipment manufacturers, energy storage solution integrators, and battery pack makers benefit from sustained utility-level demand and the 40% domestic manufacturing mandate.
• Independent Power Producers (IPPs): Large green energy generators investing in Firm and Dispatchable Renewable Energy (FDRE) and hybrid storage projects will gain contractual off-take security.
• Pumped Hydro Developers: Public and private utilities developing large-scale hydel assets stand to unlock viable monetization under the VGF framework.

According to CEA projections, India's grid will require 236 GWh of energy storage by FY 2031–32 and up to 888 GWh by FY 2035–36 to reliably integrate 500 GW of non-fossil capacity. By enforcing firm storage obligations on state utilities, the government is building the contractual foundation necessary to scale these massive capital investments.