Battery Arrangements

Accounting for power arrangements, specifically Battery Energy Storage Systems (BESS), depends on contractual specifics under Ind AS 116. An arrangement is classified as a lease if the customer conveys the right to control an identified asset by obtaining substantially all economic benefits and directing its use throughout the period. In a specific fact pattern where an electricity generator directs the charging and discharging of a non-substitutable battery for its entire capacity, the arrangement constitutes a lease. However, if the asset is not specifically identified or the generator lacks decision-making authority, the arrangement would not qualify as a lease.

There are several types of arrangements between a buyer and seller of electricity. Globally, there are gross pool and net pool arrangements. In India, buyers needing a reliable and uninterrupted power supply may enter into long-term power purchase agreements (PPA). These arrangements could be between two corporate entities, i.e. a corporate power generator and a corporate user or could be between the generator and an electricity retailer, mainly DISCOMs (electricity distribution companies). Short-term power arrangements can also be fulfilled by buying/selling power on power exchanges, e.g., IEX or PTC. The accounting response will depend upon the exact nature of the arrangement; some arrangements may qualify as le