The power sector witnessed major policy and regulatory developments in the past year, reflecting the government’s thrust on energy transition and increased private sector participation. The Ministry of Power (MoP) recently notified the Electricity (Amendment) Rules, 2025, setting a key precedent for the integration of energy storage systems (ESSs) into India’s electricity system. Meanwhile, efforts are under way to scale up India’s nuclear power capacity. Both the transmission and distribution segments saw a growing emphasis on renewable energy integration and enablement of digital infrastructure for utilities. Several positive policy measures were announced in the renewables segment, including the expansion of the viability gap funding (VGF) scheme for battery energy storage systems (BESSs), complete waiver of interstate transmission charges for electricity storage projects until June 2028, the introduction of a renewable consumption obligation framework and the roll-out of market reforms such as virtual power purchase agreements (VPPAs). These initiatives are expected to support the integration of battery storage while improving efficiency, transparency and flexibility in electricity markets.
Power Line presents a round-up of the key policy and regulatory developments in the past year…
Generation
In April 2025, the Consultative Committee of the MoP released a road map to expand nuclear energy capacity to 100 GW by 2047 under the Nuclear Mission, which was announced in the union budget. The road map includes legal amendments to promote broader sector participation, faster land acquisition, tax incentives, development of indigenous supply chains and stronger human resource capabilities in the nuclear sector. In July 2025, the Department of Atomic Energy released tariff norms for nuclear power plants for FY 2023-28. Among other provisions, these norms retain the return on equity at 15.5 per cent of the project cost, consistent with that applicable to thermal power plants (TPPs) under the FY 2024-28 tariff cycle.
In September 2025, in a key development for the energy storage segment, the MoP notified the Electricity (Amendment) Rules, 2025, stating that ESS can function either independently or as part of the generation, transmission or distribution infrastructure. The amendment increases ownership options, allowing gencos, transmission and distribution licensees, system operators and even consumers to develop, own, lease, or operate ESSs. The rules also permit ESS developers and owners to lease, rent, or sell storage capacity to any entity.
In July 2025, a significant announcement was made for the thermal segment – a new methodology for the allocation of coal linkages under Windows I and II of the revised SHAKTI (Scheme for Harnessing and Allocating Koyala Transparently in India) policy. Under the new framework, coal linkages will be granted through two simplified categories: Window I will continue to allocate coal at notified prices to central and state gencos, including joint ventures and subsidiaries; and Window II will allow domestic and imported coal-based power plants to obtain coal on an auction basis at a premium over the notified price.
In July 2025, a significant development for TPPs was the notification issued by the Ministry of Environment, Forest and Climate Change for revising sulphur dioxide compliance obligations, exempting Category C plants from installing flue gas desulphurisation (FGD) systems. This exemption applies to plants not located near critically polluted areas or the National Capital Region. These plants, however, must adhere to stack height norms by December 31, 2029. For Category A plants, FGD compliance is required by December 31, 2027, while compliance for Category B plants will be evaluated on a case-by-case basis by an expert appraisal committee, with a default deadline of December 31, 2028, for plants not under review.
In September 2025, the central government announced goods and services tax (GST) reforms for coal, removing the Rs 400 per tonne coal compensation cess, while raising the GST rate on coal from 5 per cent to 18 per cent. These measures aim to correct the inverted duty structure, improve credit availability and reduce power generation costs by about 17-18 paise per kWh.
In February 2025, the Central Electricity Authority (CEA) and the MoP introduced a procedure for verifying the captive status of generating plants, where power producers and users are spread across multiple states. These guidelines mandate annual verification of these plants and their users. For captive status, single users and group captive users (excluding cooperative societies) must consume at least 51 per cent of the net electricity generated annually, while cooperative societies must collectively meet this threshold. To further streamline the verification, the CEA released a new circular in September 2025, outlining the process for identifying specific units within a generating station meant for captive use. It mandates any generating station owned by an SPV, where certain units are designated for captive use, to notify the concerned authorities.
Transmission
In July 2025, to strengthen generation forecasting, the CEA published guidelines mandating the installation of automatic weather stations at solar and wind projects with 50 MW and above capacities. The stations must reflect site-specific conditions and transmit real-time data at 15-minute intervals, with the frequency increasing to one-minute during extreme weather conditions.
In March 2025, to address the right of way (RoW) concerns in transmission projects, the MoP issued new guidelines for determining RoW compensation for interstate transmission system (ISTS) lines. These guidelines adopt market-linked valuations, setting compensation rates at 30 per cent of the land value in rural areas, 45 per cent in municipalities, nagar panchayats and urban-planning areas; and 60 per cent in municipal corporations and metropolitan areas. The guidelines also address concerns regarding inadequate compensation in the June 2024 guidelines.
In April 2025, the MoP introduced amendments to the standard bidding documents for ISTS projects under tariff-based competitive bidding (TBCB), relaxing location restrictions for substations, switching stations and HVDC terminals. It issued further amendments in June 2025 to allow insurance surety bonds and payment on order instruments as alternatives to traditional bank guarantees, in order to ease project financing and encourage broader participation in transmission projects.
In June 2025, the MoP extended the waiver on ISTS charges for hydro pumped storage projects (PSPs) and BESS projects, granting a full waiver to hydro PSPs that are awarded construction contracts by June 30, 2028. Similarly, co-located BESSs will be eligible for a complete waiver if commissioned by the same date, provided that the power is consumed outside the state and the BESS is connected to the same ISTS substation as the associated renewable energy project.
In July 2025, the government discontinued the 100 per cent ISTS charges waiver for solar and wind projects commissioned after June 30, 2025. The waiver will be phased out gradually to promote timely project completion. However, projects commissioned on or before June 30, 2025, will continue to enjoy a 100 per cent waiver for 25 years.
Distribution
In August 2025, in a key policy development, the Supreme Court issued an order mandating electricity regulatory commissions across India to cap regulatory assets at 3 per cent of the annual revenue requirement. The ruling aims to strengthen financial discipline among discoms and ensure timely cost recovery. Under the judgment, newly created assets must be liquidated within three years, while existing assets must be cleared within four years starting April 1, 2024. To achieve this, commissions are required to set a clear liquidation plan, account for carrying costs and conduct audits for non-compliant discoms.
In June 2025, to enable digital transformation, the MoP set up a task force to design the India Energy Stack, a unified digital public infrastructure for the energy sector. The platform aims to streamline renewable energy integration, improve operational efficiency of discoms, provide consumer-centric power services, and assign unique identification to consumers, assets and transactions.
In April 2025, the CEA launched the STELLAR Model (State-of-the-art Totally Indigenously Developed Resource Adequacy Model), a planning tool that integrates generation, transmission, storage and demand response features. The model aims to support states in formulating resource adequacy plans in line with the MoP’s 2023 guidelines.
In January 2025, the CEA introduced guidelines for standardisation and interoperability in advanced metering infrastructure systems, for end-to-end communication between smart meters, head-end systems (HESs) and meter data management systems (MDMSs). The road map outlines a two-phase roll-out: Phase A establishes a unified HES interfacing seamlessly with smart meters and MDMS; and Phase B advances this by enabling plug-and-play communication modules, compatible across technologies and vendors.
In January 2025, the CEA released guidelines for benchmarking operations and maintenance norms for distribution utilities. These are provided for distribution transformers, cables and lines, and key equipment in 33/11 kV substations. They also recommend maintenance practices for power equipment.
Renewables
In February 2025, the MoP issued new TBCB guidelines for procuring stored energy from PSPs. The guidelines outline two procurement routes: Mode 1 for projects at procurer-identified locations under the build-own-operate-transfer model; and Mode 2 for developer-proposed or operational projects under the build-own-operate model. In the same month, the MoP amended the TBCB guidelines for solar, wind, wind-solar hybrids and firm and despatchable renewable projects with energy storage. The amendments allow insurance surety bonds, introduce new technical criteria and require procurers to specify substations in location-specific bids.
In April 2025, the Ministry of New and Renewable Energy (MNRE) introduced the Green Hydrogen Certification Scheme under the National Green Hydrogen Mission, outlining a detailed certification process for producers to verify that greenhouse gas emissions are limited to 2 kg CO2 equivalent per kg of hydrogen. In July 2025, under the same mission, the MNRE rolled out updated guidelines for establishing hydrogen valley innovation clusters (HVICs) and green hydrogen hubs, intended as “living labs”, to pilot green hydrogen use cases. As per the guidelines, four HVICs will be developed at Rs 1.72 billion. Green hydrogen hubs must plan for at least 100,000 metric tonnes of annual production.
In June 2025, the MNRE issued revised guidelines for installing prototype wind turbine models, allowing each model to install up to three units, which must be grid synchronised within 18 months. Additionally, all manufacturing components must be new and commercial deployment can begin only after inclusion in the Revised List of Models and Manufacturers. In the following month, the MNRE renamed this list as the Approved List of Models and Manufacturers (ALMM)-Wind and mandated key wind turbine components, such as blades, towers, gearboxes, generators and special bearings, to be sourced from this list. Subsequently, in September, wind turbine manufacturers were directed to update their type certificates within three months to ensure the traceability of these components.
In June 2025, the MoP approved the second tranche of its VGF scheme to support the development of 30 GWh of BESS capacity in India. Under this, VGF of Rs 1.8 million per MWh will be provided, totalling Rs 54 billion. This will be fully funded through the Power System Development Fund and disbursed to eligible entities in three tranches. Of the total capacity, 25 GWh is allocated to 15 states, while 5 GWh has been assigned to NTPC for efficient use of its existing infrastructure.
In June 2025, the MoP released guidelines for designating renewable energy implementing agencies (REIAs) under the TBCB framework, aiming to streamline procurement and accelerate renewables deployment. These REIAs will function as intermediaries, conducting transparent bids, signing power sale agreements (PSAs) with renewable developers and executing back-to-back power purchase agreements (PPAs) with discoms or bulk consumers. Applicant companies seeking REIA status must possess a Category I electricity trading licence from the central electricity regulatory commission (CERC).
In March 2025, the MoP introduced a draft amendment to the renewable consumption obligation (RCO) framework under the Energy Conservation Act, 2001, mandating renewable energy procurement for designated consumers such as distribution licensees, captive users and open access consumers. Recently, in August 2025, it released a revised draft specifying annual renewable energy consumption targets for these entities. These targets are set to rise from 29.91 per cent in 2024-25 to 43.33 per cent by 2029-30, with specific quotas for wind, hydro, distributed renewable energy and other sources.
In August 2025, the MNRE released revised guidelines for pilot projects aimed at promoting the production and use of green hydrogen in the residential, commercial and off-grid sectors, replacing the November 2024 guidelines. Support will be provided for hydrogen production from sources such as floating solar, biomass and wastewater. The pilot projects are allocated a budget of Rs 2 billion until FY 2025-26. The guidelines provide up to 100 per cent equipment cost coverage for government projects and 80 per cent for private firms.
In August 2025, the MoP withdrew the uniform renewable energy tariff (URET) and dissolved the solar and solar-wind hybrid central pools, citing tariff uncertainties that affected PSA signings. Nevertheless, existing bids and letters of award issued under the scheme remain valid, and renewable energy agencies have been instructed to finalise PPAs through bilateral arrangements outside the pool mechanism. URET was introduced in February 2024 for a period of three years to stabilise tariffs amidst declining bid prices.
In July 2025, the MNRE published the ALMM List-II for solar photovoltaic (PV) cells, featuring nine Indian manufacturers with a combined annual production capacity of 13,067 MW. The list, effective June 1, 2026, mandates projects using ALMM List-I modules to source solar cells featured in List-II. Later, the MNRE exempted certain government projects, such as net metering, behind-the-meter and open access schemes, from this requirement, if bids were submitted before August 31, 2025. Between December 2024 and August 2025, the MNRE updated ALMM List-I for PV modules; clarified criteria on potential induced degradation (PID) and non-PID families for cells; and lowered efficiency requirements for Category III off-grid modules. Additionally, it allowed firms without manufacturing facilities to co-brand modules for projects of less than 1 MW.
In September 2025, the MNRE introduced the National Policy on Geothermal Energy in order to accelerate the energy transition. The policy enables project developers to obtain exploration permits and 30-year leases, while the state governments are urged to set up single-window clearance systems for faster project approvals. Under the framework, emphasis is placed on promoting research, technology adoption, direct-use applications such as ground source heat pumps, and international collaboration. So far, five pilot projects have been sanctioned to assess the viability and potential of geothermal energy in India.
Recently, in September 2025, the MNRE extended the timeline for the Development of Solar Parks and Ultra Mega Solar Power Projects scheme by three years until March 31, 2029. This is aimed at facilitating the completion of ongoing projects and the settlement of committed liabilities. Notably, new approvals for solar park capacity will be allowed only until March 31, 2026.
In September 2025, the GST Council reduced GST on renewable energy equipment from 12 per cent to 5 per cent. The cut applies to solar devices, wind energy equipment and other technologies such as biogas, waste-to-energy and ocean/tidal waves energy plants or devices.
Trading
In July 2025, in a major development, the CERC issued a suo motu order to implement market coupling for integrating market segments, aligning prices and promoting liquidity. As per the order, the process will begin with day-ahead market coupling in a phased round-robin mode, scheduled to be completed by January 2026. Other market segments will be coupled at a later stage, after gaining experience from the DAM roll-out.
In May 2025, the CERC released draft guidelines for VPPAs under the Power Market Regulations, 2021. These guidelines allow designated consumers to meet RCO targets through bilateral, over-the-counter (OTC) contracts, classified as non-tradable and non-transferable. Subsequently, in June 2025 the draft Power Market (First Amendment) Regulations, 2025, were issued to formally recognise VPPAs as a financial contracting mechanism for renewable energy. The amendment also expands the OTC market to include instruments such as BESS contracts and power banking.
In June 2025, the Securities and Exchange Board of India gave approval to the National Stock Exchange to launch monthly electricity derivatives contracts, providing market participants with tools to hedge against electricity price volatility. In the following month, it launched its monthly electricity futures contracts, supported by a liquidity enhancement scheme to encourage active trading.
In sum, the policy and regulatory shifts of the past year mark an important step towards a reliable energy landscape. As India moves forward on its energy transition path, these measures provide a stable foundation for a more secure, sustainable and resilient power sector.
