Government Triples Battery Storage Target to 13,200 MWh Under VGF Amid Falling Costs

In a major move to strengthen its renewable energy infrastructure, the Indian government has significantly increased its Battery Energy Storage Systems (BESS) target under the Viability Gap Funding (VGF) scheme.

The VGF scheme, initially approved for three years (2023-24 to 2025-26), offers capital subsidies to attract investment in large-scale energy storage projects. Under the scheme, subsidies will be disbursed in five tranches: 10 percent at financial closure, 45 percent upon commissioning, and 15 percent annually over the next three years post-commissioning. This structured financial support is expected to drive private sector participation and accelerate battery storage adoption across the country.

The increased storage capacity is divided into three key segments. The Market Component accounts for 2,200 MWh, to be managed by NTPC Vidyut Vyapar Nigam (NVVN) and Solar Energy Corporation of India (SECI). These projects will receive VGF support of INR 46 lakh/MWh for Tranche-I and INR 27 lakh/MWh for Tranche-II.

The State Component, which forms the largest share with 6,000 MWh, has been allocated to states including Rajasthan, Tamil Nadu, Karnataka, Gujarat, Maharashtra, Telangana, Bihar, and Kerala. Each state will receive VGF assistance of INR 27 lakh/MWh to support the deployment of energy storage projects, which are expected to stabilize the grid and support the growing share of renewable energy in their power mix.

The Central Public Sector Undertakings (CPSU) Component has been allocated 5,000 MWh, with NVVN, NHPC, and SJVN taking charge of project execution. These projects will follow a similar VGF support structure as the state component, reinforcing the role of public sector entities in expanding battery storage capacity.

The bidding process for these projects is scheduled to be completed by June 2025, with implementation expected to take 18 to 24 months. This timeline ensures that battery storage solutions will be available to support India's growing renewable energy sector before the end of the decade.

As per the report, the sharp drop in battery storage costs, driven by technological advancements and economies of scale, has played a crucial role in the government's decision to triple its initial storage target. Large-scale battery deployment is essential for addressing the intermittency of solar and wind power, ensuring a stable and reliable power supply.

By expanding energy storage infrastructure, India aims to enhance grid stability, reduce dependence on fossil fuels, and accelerate its transition towards a cleaner and more sustainable energy system.