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Friday, September 22, 2023

Cabinet Approves Scheme for Battery Energy Storage Systems Development with Funding

The Scheme for Viability Gap Funding (VGF) for the development of Battery Energy Storage Systems (BESS) is approved by the Union Cabinet, which is presided over by the Honourable Prime Minister. By 2030–2031, 4,000 MWh of BESS projects are to be developed under the approved plan, with up to 40% of the capital cost being covered by budgetary support in the form of viability gap funding (VGF).

The move is anticipated to lower the cost of battery storage systems, improving their viability. It is a turning point in the lengthy list of pro-environment initiatives undertaken by the government.

Designed to harness the potential of renewable energy sources such as solar and wind power, the scheme aims to provide clean, reliable, and affordable electricity to the citizens. The VGF for development of BESS Scheme, with an initial outlay of Rs.9,400 crore, including a budgetary support of Rs.3,760 crore, signifies the government’s commitment to sustainable energy solutions.

By offering VGF support, the scheme targets achieving a Levelized Cost of Storage (LCoS) ranging from Rs. 5.50-6.60 per kilowatt-hour (kWh), making stored renewable energy a viable option for managing peak power demand across the country. The VGF shall be disbursed in five tranches linked with the various stages of implementation of BESS projects.

Distribution Companies (Discoms) will be given access to at least 85% of the BESS project capacity to ensure that customers receive the advantages of the programme. This will optimise the use of transmission networks while minimising waste and improving the integration of renewable energy sources into the electrical grid. As a result, less expensive infrastructure modifications will be required.

A transparent competitive bidding procedure will be used to choose BESS developers for VGF grants, fostering parity between public and private sector organisations. By encouraging healthy competition and the development of a strong ecosystem for BESS, this strategy will draw sizable investments and open doors for related businesses.

The BESS Scheme is a crucial step towards realising the government of India’s objective of encouraging clean and green energy alternatives. The government wants to give every person a brighter and greener future by utilising the power of renewable energy and promoting the use of battery storage.

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Source: PIB

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