Cabinet okays Rs 3,760-cr VGF scheme for battery energy storage system (BESS) projects

New Delhi: The Cabinet has approved a viability gap funding (VGF) scheme on Wednesday under which companies interested in developing Battery Energy Storage Systems (BESS) projects will receive upto 40 percent of their capital cost from the Central government. An official statement released by the government said, “ The approved scheme envisages the development of 4,000 MWh of BESS projects by 2030-31, with a financial support of up to 40 percent of the capital cost as budgetary support in the form of Viability Gap Funding (VGF). 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.”

BESS VGF scheme: Govt to offer Rs 3,760 cr as VGF

Announcing the Cabinet approval for the BESS VGF scheme at a press briefing, Anurag Thakur, Union Minister for Information and Broadcasting and Youth Affairs and Sports, said, “The Cabinet has allocated Rs 3,760 crore for the scheme to boost BESS manufacturing capacity in India. It will be a 100 percent Central grant.”

“This will help balance the surplus solar production with these energy storage systems. India has planned to have 50 percent of its total energy share from non-fossil fuels by 2030. So, to make renewable energy more viable, we need to strengthen the BESS. This scheme will aid in adding 4,000 MWh of power through this scheme. It will be active for the next three years till 2026. VGF will be given as support. This will be subject to 40 percent of the total capital cost. It will done in phases,” said Thakur.

VGF to be provided over 3 years, disbursed over milestones achieved

The VGF will be provided over a period of three years in five tranches till 2030-31. Funds will be disbursed based on milestones. By offering VGF support, the scheme targets achieving a Levelised 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.

Minimum of 85% of BESS project capacity will be made available to DISCOMs

To ensure that the benefits of the scheme reaches the consumers, a minimum of 85 percent 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 will also minimise wastage while optimising the utilisation of transmission networks. Consequently, this will reduce the need for costly infrastructure upgrades,” said the statement.

Selection of BESS developers for VGF grant

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,” said the government.

“The government remains committed to promoting clean and green energy solutions, and the BESS scheme is a significant step towards achieving this vision. By harnessing the power of renewable energy and encouraging the adoption of battery storage, the government aims to create a brighter and greener future for all citizens,” the statement added.

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