Defining the market classification of battery energy storage systems for Sri Lanka

The mission of the electrical energy sector towards a zero-carbon future by 2050 has made the necessity of storage systems in shaping grid reliability, deployment of renewable energy and supporting market efficiency, in Sri Lanka. Among the different storage systems’ options, the Battery Energy Storage Systems (BESS) has emerged as an immediate solution because of its versatility. This paper presents a case study on classifying BESS under the electricity sector reforms in the country. A multi-step approach was adopted including regulatory analysis, policy mapping, service-based categorization, framework development and validation against Sri Lanka’s market readiness. The proposed classification algorithm distinguishes BESS assets as generation, transmission, or hybrid, based on their operational function, point of coupling, ownership, and revenue model. Key findings highlight the dual nature of BESS services (‘market-driven’ and ‘reliability-based’), and the necessity of hybrid asset models to accommodate Sri Lanka’s transitional market structure. The paper suggests a regulatory structure that is dynamically adaptive and inherently inclusive with specific provisos such as ring-fencing conditions, vertically integrated service-based licensing, and sandbox approach to promote fairness and investment protection. The research provides policymakers, regulators and investors with a strategic roadmap for integrating BESS into Sri Lanka’s National Electricity Market, fostering innovation, transparency, and long-term grid resilience.