Cabinet approves viability gap funding of ₹3,760 cr for battery energy storage systems.

The Union Cabinet recently approved the scheme for viability gap funding (VGF) of ₹3,760 crore for the development of battery energy storage systems (BESS)

“The approved scheme envisages development of 4,000 megawatt hour (MWh) of BESS projects by 2030-31 with a financial support of up to 40 per cent of the capital cost as budgetary support in the form of VGF,” the government said.

A watershed moment in the long list of pro-environment measures taken by the government, the move is expected to bring down the cost of battery storage systems increasing their viability, it added.

Designed to harness the potential of renewable energy (RE) sources such as solar and wind power, the scheme aims to provide clean, reliable, and affordable electricity to the citizens.

Out of the total project outlay of ₹9,400 crore, the government will provide 40 per cent, or ₹3,760 crore, as VGF and the remaining will have to be invested by the participating company.

By offering VGF support, the scheme targets achieving a levelised cost of storage (LCoS) ranging from ₹5.50-6.60 per kilowatt-hour (kWh), making stored renewable energy a viable option for managing peak power demand across the country. The VGF shall be disbursed in five tranches linked with the various stages of implementation of BESS projects, it added.

To ensure that the benefits of the scheme reach the consumers, a minimum of 85 per cent of the BESS project capacity will be made available to distribution companies (Discoms). This will not only enhance the integration of renewable energy into the electricity grid but also minimise wastage while optimising the utilisation of transmission networks. Consequently, this will reduce the need for costly infrastructure upgrades.

The selection of BESS developers for VGF grants will be carried out through a transparent competitive bidding process, promoting a level playing field for both public and private sector entities. This approach will foster healthy competition and encourage the growth of a robust ecosystem for BESS, attracting significant investments and generating opportunities for associated industries.

HBL