Cabinet approves Rs 37.6 billion VGF to boost BESS

The Union Cabinet chaired by the Indian prime minister, has approved the viability gap funding (VGF) scheme to develop battery energy storage systems (BESS). According to this, 4,000 MWh of BESS projects are expected to be developed by 2030–2031, with budgetary support totaling a maximum 40 per cent of the capital cost in the form of VGF. The move is anticipated to lower the cost of BESS, improving their viability.

The programme aims to offer citizens with clean, reliable, and affordable electricity by utilising the potential of clean energy sources including solar and wind power. The VGF for the development of the BESS scheme is an initial investment of Rs 94 billion and budgetary support of Rs 37.6 billion. The scheme targets to achieve a levelised cost of storage of between Rs 5.50 and Rs 6.60 per kWh, making stored renewable energy an attractive choice for regulating peak power demand throughout the country by providing the VGF support. Furthermore, the VGF will be made available in five tranches in accordance with various stages of BESS project implementation.

The distribution companies shall be given access to at least 85 per cent of the BESS project capacity to ensure that customers receive the advantages of the scheme.

This will optimise the use of transmission networks while minimising waste and improving the integration of renewable energy sources into the electrical grid. A transparent competitive bidding procedure will be used to choose BESS developers for VGF grants, fostering parity between public and private sector organisations. By encouraging healthy competition and the development of a strong ecosystem for BESS, this strategy will draw sizable investments and open doors for related businesses.