New Delhi, April 03, 2025:The Union Cabinet approved the Viability Gap Funding (VGF) Scheme for Battery Energy Storage Systems (BESS) on 6th September 2023, to support the development of BESS. As per the Scheme, VGF support will be provided for BESS approved during 2023-26. The fund disbursement will occur in 5 tranches: 10% upon financial closure of the project, 45% upon achieving the Commercial Operation Date (COD), and 15% per year over the next 3 years from COD.With the decline in battery prices, the scheme capacity has been increased from 4000 MWh to 13,200 MWh while staying within the approved budgetary allocationof Rs 3,760 Cr.
A budgetary provision of ₹96 Crore was made for 1000 MWh BESS in 2024-25, assuming 10% disbursement upon financial closure. However, with falling BESS costs, the VGF amount reduced from ₹96 lakh per MWh (estimated in 2023-24) to ₹46 lakh per MWh or 30% of capital cost, whichever is lower. As a result, the budgetary allocation was revised from ₹96 Crore to ₹46 Crore. As per scheme guidelines, 10% of VGF is to be disbursed after financial closure. Since, none of the projects could achieve financial closure, no expenditure was incurred under the scheme during 2024-25.
Central Electricity Authority (CEA) is responsible for monitoring the scheme, while the Ministry of Power oversees the scheme, to ensure timely completion and efficient fund utilisation.
The National Electricity Plan 2023 estimates that 236 GWh BESS would be required by 2031-32. This scheme will support integration of renewable energy and help minimize costs during peak demand periods in non-solar hours.
This information was given by the Minister of State for Power, Shri Shripad Naik in a written reply in the Lok Sabha today.
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