Cabinet Approves Rs 3,760 Crore Viability Gap Funding Scheme for 4 GW Battery Storage by 2030-31

The Union Cabinet has given its nod to a groundbreaking scheme aimed at bolstering India’s renewable energy sector by supporting the development of a 4 gigawatt (GW) battery energy storage system (BESS) by 2030-31. This scheme will provide viability gap funding (VGF) to make battery storage more economically viable, with a focus on enhancing the integration of solar and wind energy into the grid.

Scheme Overview:

Funding Allocation:

• The VGF scheme for BESS projects boasts an initial outlay of Rs 9,400 crore.
• It includes a budgetary grant of Rs 3,700 crore, showcasing a substantial government commitment to advancing energy storage technology.

Disbursement Strategy:

• The VGF will be disbursed in five tranches, strategically linked to the various stages of BESS project implementation.

Renewable Energy Focus:

• The primary objective of this scheme is to address the energy storage needs of the renewable energy sector, particularly solar and wind power.

Cost Reduction and Viability:

• The scheme aims to reduce the cost of battery storage systems and enhance their economic viability.
• The Levelized Cost of Storage (LCoS) target is set at a range of Rs 5.50-6.60 per kilowatt-hour (kWh), which will make stored renewable energy a cost-effective solution for managing peak power demand nationwide.

Beneficiaries:

• 85% of the BESS projects under this scheme will be allocated to power distribution companies (discoms).
• This allocation will facilitate the seamless integration of renewable energy into the electricity grid while minimizing wastage and optimizing transmission network utilization.

Competitive Selection:

• Developers for BESS projects will be chosen through a competitive bidding process, open to both public and private sector entities.
• This approach encourages healthy competition, fosters the growth of a robust BESS ecosystem, attracts significant investments, and creates opportunities for associated industries.

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