Union Cabinet Approves Rs 3,760 Crore VGF Scheme For Development Of Battery Energy Storage Systems

The Union Cabinet on Wednesday (6 September) approved a viability gap funding scheme for the development of Battery Energy Storage Systems (BESS) in India.

The approved Scheme for Viability Gap Funding (VGF) 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 move is expected to bring down the cost of battery storage systems increasing their viability, according to a government statement.

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

"The VGF for development of BESS Scheme, with an initial outlay of Rs 9,400 crore, including a budgetary support of Rs 3,760 crore, signifies the government's commitment to sustainable energy solutions," it said.

"By offering VGF support, the scheme targets achieving a Levelized Cost of Storage (LCoS) ranging from Rs 5.50-6.60 per kilowatt-hour (kWh), making stored renewable energy a viable option for managing peak power demand across the country," the statement added.

The VGF will be disbursed in five tranches linked with the various stages of implementation of BESS projects.

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).

According to the statement, 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, it said.

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, the statement said.