MNRE Clarifies Regulatory Treatment of ESS under FDRE Framework

The Ministry of New and Renewable Energy (“MNRE”), vide Office Memorandum dated April 11, 2026, has issued a clarification addressing the regulatory treatment of energy storage systems (ESS) under the firm and dispatchable renewable energy (FDRE) bidding guidelines, providing regulatory clarity to developers operating hybrid and storage-linked renewable projects.

The clarification confirms that no no-objection certificate (NOC) is required from intermediary procurers, end procurers, or buying entities for the sale of electricity from ESS where such systems are charged using non-renewable power and the associated renewable energy project has not yet been commissioned. In such cases, developers are permitted to sell power through merchant or third-party arrangements, as such supply falls outside the scope of PPA-linked renewable energy obligations.

A key aspect of the clarification is that ESS is treated as a storage component rather than a renewable energy generating source. Consequently, electricity discharged from storage systems charged using conventional grid power does not qualify as renewable energy under the applicable FDRE guidelines and cannot be supplied under PPAs linked to renewable energy procurement.

The clarification also addresses the applicability of the “right of first refusal” provision under FDRE PPAs. This right is limited to renewable energy generated from commissioned solar or wind assets and does not extend to power discharged from ESS charged using non-renewable sources. Accordingly, such power remains outside the scope of PPA-linked supply until at least one renewable generation component becomes operational.

Further, the MNRE has reiterated that developers may commence supply from individual project components prior to full project commissioning, subject to a 15-day advance notice to procurers. Where procurers do not accept such supply within the stipulated period, developers are permitted to sell the power through power exchanges or bilateral arrangements. In cases where acceptance is granted, procurers retain priority, with tariff provisions applicable as per bidding documents.

The clarification is particularly relevant for hybrid projects where battery storage systems may be commissioned ahead of renewable generation assets. By removing the NOC requirement for such interim power sales, the framework reduces regulatory friction and avoids inconsistencies in the treatment of non-renewable power under renewable PPAs.