Govt nod to Viability Gap Funding for Battery Energy Storage Systems Development

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New Delhi: The government has approved the Scheme for Viability Gap Funding (VGF) for the development of Battery Energy Storage Systems (BESS). The approved scheme calls for the development of 4,000 MWh of BESS projects by 2030–31, with budgetary support amounting to up to 40% of the capital cost in the form of Viability Gap Funding (VGF).

The move, a watershed moment in the government’s long list of pro-environmental measures, is expected to reduce the cost of battery storage systems, increasing their viability.

The scheme aims to provide clean, reliable, and affordable electricity to citizens by harnessing the potential of renewable energy sources such as solar and wind power. With an initial outlay of Rs. 9,400 crore, including budgetary support of Rs. 3,760 crore, the VGF for the development of the BESS Scheme demonstrates the government’s commitment to sustainable energy solutions.

The scheme aims to achieve a levelized cost of storage (LCoS) ranging from Rs. 5.50 to 6.60 per kilowatt-hour (kWh) by offering VGF support, making stored renewable energy a viable option for managing peak power demand across the country. The VGF will be distributed in five tranches, corresponding to the various stages of BESS project implementation.

To ensure that the scheme’s benefits reach consumers, distribution companies (Discoms) will be given access to at least 85% of the BESS project capacity. This will not only improve the integration of renewable energy into the electricity grid, but it will also reduce waste while optimising transmission network utilisation. As a result, costly infrastructure upgrades will be avoided.

A transparent competitive bidding process will be used to select BESS developers for VGF grants, promoting a level playing field for both public and private sector entities. This strategy will encourage healthy competition and the development of a robust ecosystem for BESS, attracting significant investments and creating opportunities for related industries.

The Indian government is actively promoting clean energy solutions through the BESS Scheme, aiming to create a greener future by utilising renewable energy and promoting battery storage.

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