Cabinet Approves Rs.14,500 Crore Viability Gap Funding Scheme for Development of 92 GWh Grid-Scale Energy Storage Systems

Key Highlights:

• The Union Cabinet approved the Viability Gap Funding (VGF) Scheme for Development of Grid-Scale Energy Storage Systems.
• The scheme has a total financial support of Rs. 14,500 crore for FY 2026-27 to FY 2030-31.
• It aims to develop 92 GWh of new Grid-Scale Energy Storage Systems (ESS) capacity across the country.
• The target capacity includes 60 GWh of Hydro Pumped Storage Plant (PSP) and 30 GWh of Battery Energy Storage System (BESS).
• A minimum Domestic Content Requirement (DCR) of 40% is mandated for BESS projects to promote indigenous manufacturing.

Detailed Insights:

• The scheme is crucial for strengthening India's power sector infrastructure and integrating large-scale renewable energy.
• It will help meet the projected Grid-Scale ESS capacity requirement of 411 GWh by 2031-32.
• The total estimated investment for the 92 GWh capacity is Rs. 97,600 crore, with VGF improving project viability.
• Capacity allocation will be done through a tariff-based competitive bidding process involving both public and private sectors.
• The initiative aims to reduce import dependence, enhance energy security, and advance the vision of Atmanirbhar Bharat and Viksit Bharat.

Key Concepts Involved:

• Viability Gap Funding (VGF): Financial support provided by the government to infrastructure projects that are economically justified but not financially viable.
• Grid-Scale Energy Storage Systems (ESS): Technologies that store electrical energy and deliver it back to the grid when needed, balancing supply and demand.
• Hydro Pumped Storage Plant (PSP): A type of ESS that stores energy by pumping water uphill to a reservoir and releasing it through turbines to generate electricity.
• Battery Energy Storage System (BESS): A type of ESS that uses electrochemical batteries to store and discharge electricity.
• Domestic Content Requirement (DCR): A policy mandating a certain percentage of components or manufacturing processes to be sourced or performed domestically.