Cabinet Clears Rs 14,500-Crore Push For Energy Storage Projects

The Union Cabinet, chaired by Prime Minister Narendra Modi, on Wednesday approved the Viability Gap Funding (VGF) Scheme for development of grid-scale energy storage systems, with a total financial support of Rs 14,500 crore for the period FY 2026-27 to FY 2030-31.

The scheme aims to support the development of 92 GWh of yet to be commissioned, energy storage capacity across the country. The scheme will support the creation of new capacities equivalent to 170 per cent of the present-day Grid Scale Energy Storage System capacity in the country and help meet the required Grid Scale ESS capacity of 411 GWh by 2031-32, according to an official statement.

The scheme marks a significant step towards strengthening India's power sector infrastructure, facilitating large-scale integration of renewable energy and ensuring reliable, affordable and round-the-clock power supply. It will also provide an impetus to domestic manufacturing of battery energy storage systems, reduce import dependence and enhance the country's long-term energy security.

The scheme envisages the development of 60 GWh of Hydro Pumped Storage Plant (PSP) capacity, 30 GWh of Battery Energy Storage System (BESS) capacity, and 2 GWh of capacity through alternative energy storage technologies, with a total estimated investment of Rs 97,600 crore. The VGF support will help improve the financial viability of these projects and accelerate the deployment of large-scale energy storage infrastructure in the country, the statement said.

Energy storage capacity will be allocated through a tariff-based competitive bidding process. Public and private sector electricity distribution companies will be eligible for VGF support for BESS and Hydro PSP projects, while projects based on alternative energy storage technologies will be implemented by public and private sector entities.

A key objective of the scheme is to strengthen India's domestic energy storage manufacturing ecosystem through demand-side financial support and reduce dependence on imported components. To promote indigenous manufacturing, BESS projects will be subject to a minimum Domestic Content Requirement (DCR) of 40 per cent. The requirement will encourage domestic manufacturing, create opportunities for Indian industry and complement existing supply-side incentives for battery manufacturing.

The scheme represents an important intervention towards building a flexible, resilient and future-ready electricity system. By accelerating the deployment of grid-scale energy storage, it will facilitate greater utilisation of renewable energy, address the variability of renewable energy generation and reduce dependence on conventional generation for meeting balancing round-the-clock power supply. The initiative will strengthen grid stability, improve renewable energy integration, encourage domestic manufacturing and enhance India's energy security, while advancing the vision of Atmanirbhar Bharat and Viksit Bharat, the statement added.

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