The Union Cabinet approves 3,760 crore for a 4,000 MWh battery storage system's viability gap funding

The government has granted its approval for an allocation of Rs 3,760 crore towards viability gap funding. This funding will cover up to 40 percent of the total capital cost required to establish a battery energy storage system with a capacity of 4,000 MWh within the country. This announcement was made by Union Minister Anurag Thakur. The entire Rs 3,760 crore viability gap funding (VGF) will be borne by the central government, the Information and Broadcasting Minister said while briefing the media about the Cabinet decisions.

The VGF will be released in five tranches till 2030-31 and help in the creation of 4,000 MWh storage across the country. The viability gap funding, Thakur said, will lead to an investment of Rs 9,500 crore. India has made significant progress in renewable energy. Solar energy has increased from 2.6 GW in 2014 to 71 GW currently, and wind energy has increased from 21 GW to 40 GW. India now meets 25 percent of its energy demand from renewable sources, including large hydro plants. To ensure a continuous supply of renewable energy, India plans to develop battery energy storage systems.

The BESS would enable the use of stored renewable energy in peak hours, he said. The minister said that the scheme is in sync with India’s ambition to meet 50 percent of energy requirements through renewable energy and non-fossil energy sources by 2030 and also help reduce carbon emissions. “The Union Cabinet, chaired by the Prime Minister approves the Scheme for Viability Gap Funding (VGF) for the development of Battery Energy Storage Systems (BESS),” an official statement said.

The approved scheme envisages the development of 4,000 MWh of BESS projects by 2030-31, with financial support of up to 40 percent of the capital cost in the form of VGF, it explained. The move is expected to bring down the cost of battery storage systems increasing their viability. The government is investing Rs 9,400 crore in the BESS scheme for sustainable energy. They want to achieve a cost of storing renewable energy between Rs 5.50 to Rs 6.60 per kilowatt-hour (kWh). The investment will be given in five parts during the implementation of the BESS projects. The scheme ensures that 85 percent of the BESS project capacity will be provided to power distribution companies. This helps integrate renewable energy into the grid, reduces wastage, and optimizes transmission networks. It also minimizes the need for costly infrastructure upgrades. BESS developers will be selected through a fair bidding process.