Union Cabinet Approves Groundbreaking Scheme for Battery Energy Storage Systems

PM Modi
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New Delhi, 6th September 2023: In a historic move that underscores the government’s dedication to environmental sustainability, the Union Cabinet, under the leadership of the Prime Minister, has given its nod to the Scheme for Viability Gap Funding (VGF) for the development of Battery Energy Storage Systems (BESS).

This approved scheme sets its sights on the development of 4,000 MWh of BESS projects by the year 2030-31, with a financial boost of up to 40% of the capital cost in the form of budgetary support through Viability Gap Funding (VGF). This step is poised to be a game-changer, potentially reducing the cost of battery storage systems and rendering them more financially viable.

Tailored to tap into the potential of renewable energy sources, such as solar and wind power, the scheme’s primary objective is to deliver clean, dependable, and affordable electricity to the populace. The VGF for BESS development Scheme, boasting an initial allocation of Rs. 9,400 crore, including a budgetary allocation of Rs. 3,760 crore, underscores the government’s unwavering commitment to sustainable energy solutions.

By extending VGF support, the scheme aspires to achieve a Levelized Cost of Storage (LCoS) spanning between Rs. 5.50 and Rs. 6.60 per kilowatt-hour (kWh), making stored renewable energy an economically attractive option for addressing peak power demand nationwide. The VGF disbursement will be divided into five tranches, linked to the various stages of BESS project implementation.

To ensure that the benefits of the scheme trickle down to consumers, a minimum of 85% of the BESS project capacity will be earmarked for Distribution Companies (Discoms). This not only facilitates the integration of renewable energy into the national electricity grid but also minimizes waste while optimizing the use of transmission networks.

Consequently, this approach reduces the necessity for costly infrastructure upgrades.

The selection of BESS developers for VGF grants will be executed through a transparent competitive bidding process, fostering an equitable playing field for both public and private sector entities. This approach nurtures healthy competition and promotes the growth of a robust ecosystem for BESS, drawing substantial investments and generating opportunities for allied industries.