Mumbai, Nov. 9 -- The Union Cabinet has approved a Viability Gap Funding (VGF) scheme with financial support of Rs. 145 bn for developing 92 GWh of grid-scale energy storage capacity. The scheme will run from FY 2026-27 to FY 2030-31 and is intended to support capacity that has yet to be commissioned across India.
The proposed capacity will represent 170 per cent of the country's present grid-scale energy storage capacity and contribute towards the required 411 GWh capacity by 2031-32. The initiative is designed to support larger integration of renewable energy, improve grid stability and enable reliable, affordable and round-the-clock electricity supply.
Under the scheme, 60 GWh will be allocated to Hydro Pumped Storage Plant (PSP) projects, 30 GWh to Battery Energy Storage Systems (BESS) and 2 GWh to alternative energy storage technologies. The projects are expected to involve total investment of Rs. 976 bn, with VGF support intended to improve their financial viability and speed up the deployment of large-scale infrastructure.
Capacity will be allocated through a tariff-based competitive bidding process. Public and private sector electricity distribution companies will be eligible for support for BESS and Hydro PSP projects, while projects using alternative storage technologies may be implemented by public and private sector entities.
The scheme also includes a minimum Domestic Content Requirement of 40 per cent for BESS projects. The requirement is intended to encourage domestic manufacturing, create opportunities for Indian industry and reduce dependence on imported components, alongside existing supply-side incentives for battery manufacturing.
The government expects the programme to improve the flexibility and resilience of the electricity system by addressing variations in renewable generation and reducing reliance on conventional generation for balancing power. It is also intended to strengthen energy security, support wider renewable energy utilisation and advance domestic manufacturing capabilities.
Published by HT Digital Content Services with permission from Construction World.