Union Cabinet Approves Fund for Battery Energy Storage Systems (BESS)

• 08 Sep 2023

Recently, the Union Cabinet has granted approval for a Rs. 3,760 crore viability gap fund (VGF) to support battery energy storage systems (BESS), bolstering the renewable energy sector's ability to store green energy during periods of low generation.

Key Points:

• VGF for BESS: Under this initiative, the government will offer financial support of up to 40% of the capital cost for BESS projects, with a total storage capacity of 4,000 megawatt-hours (MWh) until FY31.
• This move aims to reduce the levelized cost of storage (LCoS) to Rs. 5.50-6.60 per kilowatt-hour (kWh), making energy storage an economically viable solution to manage peak power demand.
• Tranches and Investments: The VGF disbursement will occur in five tranches linked to various stages of BESS project implementation.
• The government anticipates that this investment of Rs. 3,760 crore will attract around Rs. 9,500 crore in investments.
• The goal is to achieve 50% of India's energy requirements from renewable or non-fossil sources by 2030.
• Distribution Company Access: To ensure the benefits of this scheme reach consumers and support power distribution, a minimum of 85% of BESS project capacity will be made available to distribution companies (discoms).
• This move enhances renewable energy integration into the electricity grid, minimizes wastage, and optimizes transmission network usage, reducing the need for costly infrastructure upgrades.
• Competitive Selection: BESS developers will be selected for VGF grants through competitive bidding, fostering competition and encouraging the growth of a robust BESS ecosystem.
• Importance of BESS: Grid-scale battery storage systems are crucial for managing renewable energy's fluctuation based on sunlight and wind conditions.
• These storage systems store energy for release during periods of low generation, providing stability to the grid. However, their adoption in India has been limited due to high costs.