India's VGF Scheme for Battery Energy Storage Systems

What is Viability Gap Funding (VGF)?

Viability Gap Funding (VGF) is a financial support mechanism provided by the government to make projects economically viable and attractive to investors. VGF specifically supports projects that are socially or economically essential but are not financially appealing without government assistance.

What is the purpose of the VGF for BESS in India?

The VGF for BESS aims to encourage the development of battery energy storage systems that can store energy from renewable sources like solar and wind. This helps in managing peak power demands, stabilizing the grid, and ensuring a continuous and reliable power supply.

How much total capacity is targeted under the BESS VGF scheme by 2030-31?

The scheme targets the development of 4,000 MWh of BESS projects by the year 2030-31. This capacity is intended to support the integration of renewable energy into India's power grid.

What is the financial outline of the VGF for BESS?

The scheme has an initial financial outlay of ?9,400 crore, with ?3,760 crore provided as budgetary support in the form of Viability Gap Funding. This funding is designed to cover up to 40% of the capital cost of BESS projects.

What are the expected cost benefits of the VGF for BESS?

The scheme aims to achieve a Levelized Cost of Storage (LCoS) ranging from ?5.50 to ?6.60 per kilowatt-hour (kWh). This pricing makes renewable energy storage more feasible and economically viable for distribution companies and consumers.

How will the BESS capacity be utilized?

At least 85% of the BESS project capacity developed under the VGF scheme will be made available to Distribution Companies (Discoms). This arrangement ensures that the benefits of energy storage are widely disseminated, contributing to overall grid stability and efficiency.

How will BESS developers be selected?

BESS developers for the VGF grants will be selected through a competitive bidding process. This transparent selection process is designed to ensure fairness and encourage participation from both public and private sector entities.

What is the role of BESS in India’s energy strategy?

BESS plays a crucial role in India’s energy strategy by enabling the storage of renewable energy, thus facilitating the management of supply and demand, reducing energy wastage, and enhancing the overall reliability of the energy system.

These FAQs provide a basic understanding of the Viability Gap Funding for BESS and its strategic importance in advancing India's renewable energy capabilities, ensuring energy availability during peak demand, and contributing to the nation's energy transition goals.


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