India’s Ministry of Power has announced the second tranche of the Viability Gap Funding (VGF) scheme to support the development of 30 GWh of battery energy storage systems (BESS), with a total budgetary outlay of INR 5,400 crore. The funding will be provided from the Power System Development Fund.
The scheme will extend financial support to 15 states and NTPC, with INR 18 lakh per MWh allocated for each project. Of the total 30 GWh target, 25 GWh will be distributed among 15 states to meet their energy storage needs, while 5 GWh will be allocated to NTPC to optimize the use of existing thermal generation and transmission infrastructure, and to supply electricity during non-solar hours in a reliable and cost-effective manner.
The state-wise allocation is as follows:
- 4 GWh each: Rajasthan, Gujarat, Maharashtra
- 2 GWh each: Karnataka, Andhra Pradesh
- 1.5 GWh each: Tamil Nadu, Madhya Pradesh, Telangana, Uttar Pradesh
- 500 MWh each: Haryana, Kerala, Punjab, Chhattisgarh, Odisha, Uttarakhand
The VGF will be disbursed in three stages:
- 20% upon financial closure of the project
- 50% upon commissioning
- 30% after one year of operation from the commissioning date
Projects must be commissioned within 18 months from the signing of the Battery Energy Storage Purchase Agreement (BESPA) or Power Purchase Agreement (PPA). The projects will be awarded through a tariff-based competitive bidding process.
According to the Central Electricity Authority (CEA), India requires 37 GWh of BESS capacity by 2027 and 236 GWh by 2031–32. So far, 13.2 GWh of BESS capacity has been approved under the ongoing VGF scheme.
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