Centre launches Rs 5400 crore VGF scheme for 30 GWh battery storage

The Ministry of Power has approved a Viability Gap Funding (VGF) scheme to support 30 GWh of Battery Energy Storage Systems (BESS) across India. Funded by the Power System Development Fund (PSDF), the scheme allocates Rs 5400 crore to help stabilise the grid and integrate renewable power.

The VGF scheme will support BESS rollout in 15 states and through NTPC. Rajasthan, Gujarat, and Maharashtra will each get 4000 MWh of capacity. Tamil Nadu, Karnataka, and Andhra Pradesh will get between 500 and 2000 MWh. NTPC will install 5000 MWh of storage to complement its thermal and transmission assets.

BESS is critical for managing renewable energy variability. It enables solar and wind power to be stored and dispatched when needed, especially during evening peaks. With India targeting 393 GW of renewable capacity by 2030, storage is key to reliability.

The Central Electricity Authority (CEA) projects 37 GWh of BESS needed by 2027, rising to 236 GWh by 2031–32. The new 30 GWh scheme builds on a previous VGF scheme that approved 13.2 GWh.

The VGF will provide Rs 18 lakh per MWh to developers. It will be paid in three tranches: 20% after financial closure with a bank guarantee, 50% at commissioning, and 30% after one year of operation. Eligible entities must complete projects within 18 months of signing Battery Energy Storage Purchase Agreements (BESPAs) or Power Purchase Agreements (PPAs).

Developers will be selected through Tariff Based Competitive Bidding (TBCB) under Section 63 of the Electricity Act, 2003. BESS projects will follow either Build Own Operate (BOO) or Build Own Operate Transfer (BOOT) models, with contract terms of 12–15 years.

All entities must submit implementation plans to the CEA within 60 days, detailing the project locations, capacity, and implementing agencies. NTPC has the flexibility to implement its share under Section 62, as per Central Electricity Regulatory Commission (CERC) norms.

Connectivity can be through intra-state (InSTS) or inter-state (ISTS) transmission networks. Land and grid access will be arranged by the states or their agencies. Performance will be monitored via a Management Information System (MIS) portal, with monthly reporting to the Ministry of Power and quarterly performance checks.

Entities must submit audited expenditure statements and provide a bank guarantee equal to the VGF amount. Funded assets cannot be sold without prior approval.