Boosting India’s Renewable Energy Sector: ₹3,760 Crore Viability Gap Fund for Battery Energy Storage Systems

Introduction

In a significant move towards achieving India’s ambitious renewable energy goals, the Union Cabinet recently approved a ₹3,760 crore viability gap fund (VGF) dedicated to battery energy storage systems (BESS). This strategic decision not only bolsters the renewable energy sector but also addresses the critical need for energy storage to ensure a consistent power supply during fluctuations in green power generation. We delve deeper into the details of this groundbreaking initiative and its potential impact on India’s energy landscape.

The Viability Gap Fund for BESS

Under this groundbreaking scheme, the government is committed to providing financial support of up to 40% of the capital cost for BESS projects, totaling a whopping 4,000 megawatt-hours (MWh) by fiscal year 2031. The primary objective of this scheme is to significantly reduce the levelized cost of storage (LCoS) from the current ₹10-11 per kilowatt-hour (kWh) to a more affordable ₹5.50-6.60 per kWh. This reduction in cost will make energy storage a viable option for efficiently managing peak power demand.

Union Minister for Information and Broadcasting, Anurag Thakur, emphasized the government’s commitment to achieving 50% of India’s energy requirement from renewable or non-fossil energy sources by 2030. He highlighted that this ₹3,760 crore VGF represents a 100% central grant and has the potential to attract investments totaling around ₹9,500 crore, demonstrating the government’s dedication to renewable energy.

Key Implementation Details

The government intends to disburse the VGF in five tranches, strategically linked to different stages of BESS project implementation. Additionally, to ensure that the benefits of this scheme directly reach consumers, a minimum of 85% of BESS project capacity will be made available to distribution companies (discoms). This approach aims to enhance renewable energy integration into the electricity grid, minimize energy wastage, and optimize the utilization of transmission networks, thereby reducing the need for costly infrastructure upgrades.

Promoting Healthy Competition and Investment

BESS developers will be selected for VGF grants through a competitive bidding process. This approach is designed to foster healthy competition within the industry and encourage the growth of a robust ecosystem for BESS. As a result, it is expected to attract significant investments and generate opportunities for associated industries, thereby bolstering India’s renewable energy sector.

The Significance of Grid-Scale Battery Storage

Grid-scale battery storage systems play a pivotal role in the transition to renewable energy, as they enable the efficient storage of excess energy generated during periods of high renewable power generation. This stored energy can then be released during periods of low or no green energy production, ensuring a continuous power supply. However, the high initial expenditure has been a barrier to the widespread adoption of such systems in India.

Government’s Focus on Renewable Energy

The government’s dedication to the renewable energy sector is evident in its goal of achieving 500 gigawatts (GW) of installed renewable energy capacity. In recent years, it has introduced several policies and initiatives, such as guidelines for the procurement and utilization of BESS, Energy Storage Obligations (ESO), and a production-linked incentive (PLI) scheme for battery storage. Furthermore, there are plans to reduce the goods and services tax (GST) on grid-scale battery storage to 5%, providing further incentives for investment.

Looking Ahead

As of FY23, India had approximately 37MWh of BESS capacity, but the Central Electricity Authority estimates that the demand for battery storage will surge to 236.22 gigawatt-hours by 2031-32. The approval of the ₹3,760 crore VGF for BESS projects is a significant step towards meeting this growing demand, reducing reliance on fossil fuels, and achieving a sustainable and green energy future for India.

Conclusion

The Union Cabinet’s approval of the ₹3,760 crore VGF for battery energy storage systems represents a pivotal moment in India’s journey towards renewable energy adoption. This financial support, coupled with the government’s proactive policies and incentives, is expected to drive substantial investment in the renewable sector, reduce energy costs, and ultimately pave the way for a greener and more sustainable energy future. India is well on its way to achieving its renewable energy targets and reducing its carbon footprint.

FAQs :

1. What is the ₹3,760 crore Viability Gap Fund (VGF) for BESS?

The ₹3,760 crore VGF is a government grant aimed at enhancing the viability of infrastructure projects related to battery energy storage systems (BESS) in India. It provides financial support to reduce the cost of implementing BESS projects.

2. What is the purpose of the VGF for BESS?

The primary purpose of the VGF for BESS is to make energy storage more affordable and economically viable, especially for managing peak power demand during periods of low or no green power generation.

3. How does the VGF scheme work?

Under the scheme, the government offers financial support of up to 40% of the capital cost for BESS projects totaling 4,000 megawatt-hours (MWh) by fiscal year 2031. This support aims to reduce the levelized cost of storage (LCoS) significantly.

4. Who is eligible to benefit from the VGF for BESS?

BESS developers in India can participate in the scheme and compete for VGF grants through a competitive bidding process.

5. How will the VGF be disbursed to BESS projects?

The VGF will be disbursed in five tranches, linked to various stages of BESS project implementation, ensuring that funds are released as projects progress.

6. How will consumers benefit from this scheme?

To ensure that the scheme’s benefits reach consumers, a minimum of 85% of the BESS project capacity will be made available to distribution companies (discoms). This helps integrate renewable energy into the grid and minimizes energy wastage.

7. Why is grid-scale battery storage important for India?

Grid-scale battery storage is crucial because it allows India to efficiently store excess renewable energy and release it during periods of low renewable power generation. This ensures a stable and consistent power supply.

8. How does this initiative align with India’s renewable energy goals?

India has set ambitious renewable energy targets, aiming to achieve 500 gigawatts (GW) of installed renewable energy capacity. This VGF scheme is a significant step towards meeting these targets.

9. What other initiatives has the government introduced to promote renewable energy and battery storage?

The government has introduced various policies and incentives, including guidelines for BESS procurement, Energy Storage Obligations (ESO), a production-linked incentive (PLI) scheme for battery storage, and plans to reduce the goods and services tax (GST) on grid-scale battery storage.

10. How can businesses and investors participate in the growth of India’s renewable energy sector?

Businesses and investors can explore opportunities in BESS development, renewable energy projects, and associated industries. They can also stay informed about government policies and incentives to make informed investment decisions.

These FAQs provide an overview of the ₹3,760 crore VGF for BESS and its significance in India’s renewable energy landscape. For specific details and application procedures, individuals and organizations should refer to official government sources and guidelines.