Government considering viability gap funding, ALMM mandate for battery storage projects


India’s power ministry has developed a national framework for promoting energy storage systems as the nation shifts from fossil fuel-based capacity to renewable energy capacity. The framework aims to ensure an environmentally sustainable and financially viable power sector.

Under this framework, the government is considering financial incentives such as viability gap funding for battery energy storage systems, additional budgetary support for enabling pumped storage infrastructure, and green finance.

For the establishment of BESS projects, costs are a challenge in the initial years due to low volumes. The framework proposes viability gap funding (VGF) to the initial few BESS projects to decrease the levelized storage cost and make BESS a viable option. The VGF may be up to 40% of the project’s capital cost, provided the project is commissioned within 18 to 24 months. 

“With the proposed VGF, the levelized cost of storage (LCoS) can be managed at affordable levels. Considering the cost of energy for charging the BESS, the total cost of energy from BESS would be comparable to the price in the power exchanges during the peak demand periods. Thus, with the proposed VGF, the BESS would become a viable option for peak power management,” states the document.

Further, concessional green finance accessed by the government may be used to initiate and accelerate the pace of ESS establishment. Financial institutions like PFC, REC, and IREDA may also extend long-term loans to ESS projects.

To maintain quality and standards for BESS, the government may consider issuing an Approved List of Models and Manufacturers (ALMM) mandate for BESS for power sector applications, similar to the ALMM list of solar PV modules issued by the Ministry of New and Renewable Energy (MNRE). Models and manufacturers included in the list would qualify for use in government or government-assisted projects, projects under government schemes, and projects set up for the sale of electricity to public utilities within the country.

Among other provisions, the guidelines for developing a national resource adequacy plan (RAP) may incorporate ESS into the planning process. This will help to ensure the availability of sufficient generation and demand-responsive resources to meet expected peak demand reliably. A long-term resource adequacy plan [for a 10-year period] would give the trajectory for the requirement of ESS from the distribution level up to the national level. This will facilitate the developers, especially the PSP developers, to plan for the additional capacity well ahead of time, stated the document. 

Connectivity of ESS to the nearest inter-state transmission system (ISTS) may be granted on a priority basis. 

The central government may notify technology agnostic bidding guidelines for long-duration energy storage, short-duration energy storage, and ancillary services to assist utilities, procurers, and developers in faster development of financially viable and environmentally sustainable ESS projects for the Indian power sector. “The bidding may be based on either composite tariff (including the cost of input power) in case input power is arranged by the developer or tariff for storage on a per megawatt hour basis if the input power is to be arranged by the procurer of the storage capacity.” 

The end-of-life management plan may be included in the bidding documents of all ESS projects.

To ensure adequate storage capacity to supply reliable power, new RE projects (excluding hydro projects) with an installed capacity of over 5 MW may be mandated to install ESS (of at least 1-hour storage) for a minimum 5% of the RE capacity. 

The above measures will add to the existing policy framework for promoting energy storage systems.

As per the National Electricity Plan (NEP) 2023, India’s energy storage capacity requirement is projected to be 16.13 GW (7.45 GW pumped hydro storage and 8.68 GW BESS) in year 2026-27, with a storage capacity of 82.32 GWh (47.6 GWh from pumped hydro storage and 34.72 GWh from BESS). The energy storage capacity required for 2029-30 is likely to be 60.63 GW (18.98 GW pumped hydro storage and 41.65 GW BESS) with storage of 336.4 GWh (128.15 GWh from pumped hydro storage and 208.25 GWh from BESS).

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