Cabinet approves ₹3,760 cr scheme to boost battery storage system

Prime Minister Narendra Modi-led Cabinet today has approved a scheme for viability gap funding for the development of Battery Energy Storage Systems (BESS) by approving budgetary support worth ₹3,760 crore.

With this scheme, the Centre aims to develop 4,000 MWh of BESS projects by 2030-31, with financial support of up to 40% of the capital cost as budgetary support.

Union Minister Anurag Thakur, while announcing the scheme, says the government has unveiled the BESS Scheme to “energise the nation for a brighter tomorrow”.

"A watershed moment in the long list of pro-environment measures taken by the Government, the move is expected to bring down the cost of battery storage systems increasing their viability," says a Cabinet statement.

Under the scheme, the initial outlay of ₹9,400 crore, including budgetary support of ₹3,760 crore, will be offered. The scheme is expected to bring down the cost of battery storage systems increasing their viability.

The scheme is designed to harness the potential of “renewable energy sources” such as solar and wind power. "By offering VGF support, the scheme targets achieving a Levelised Cost of Storage (LCoS) ranging from ₹5.50-6.60 per kilowatt-hour (kWh), making stored renewable energy a viable option for managing peak power demand across the country.”

The funding will be disbursed in five tranches, which will be linked with the various stages of implementation of BESS projects.

Around 85% of BESS project capacity will go to discoms to benefit end consumers. "This will not only enhance the integration of renewable energy into the electricity grid but also minimise wastage while optimising the utilisation of transmission networks. Consequently, this will reduce the need for costly infrastructure upgrades."

The announcement comes in the wake of the Centre's target to achieve 50% of the needs via renewable energy by 2030.

The selection of BESS developers for VGF grants will be carried out through a competitive bidding process. "This approach will foster healthy competition and encourage the growth of a robust ecosystem for BESS, attracting significant investments and generating opportunities for associated industries."

The government says as of June 30, 2023, a total of 176.49 GW of renewable energy capacity has been installed in the country.

The cabinet, meanwhile, also approved ₹1,164 crore as an additional fund requirement under the Industrial Development Scheme, 2017, for Himachal Pradesh and Uttarakhand. The funds will help meet the committed liabilities under the scheme up to 2028-29.

All eligible new industrial units and existing industrial units in these states will be provided a central capital investment incentive for access to credit (CCIIAC) at 30% of the investment in plant and machinery, with an upper limit of ₹ 5 crore. Such units will also be eligible for reimbursement of 100% insurance premium on insurance of building and plant & machinery for 5 years from the date of operation.