Power Min suggests 40% viability gap funding for Battery Energy Storage System projects
New Delhi: Power Ministry has proposed 40 per cent viability gap funding (VGF) — simply put, capital subsidy from the Centre — for Battery Energy Storage System (BESS) projects promoted both by private and public sector companies.
With a target of adding 4,000 megawatt-hour of BESS by 2026-27, the VGF grant has been estimated at Rs 3,760 crore considering a cost of Rs 2.4 crore per MW-hour of lithium-ion battery systems.
However, projects seeking VGF funding would need to be approved before April 2025 with fund disbursals in five tranches ending March 2030 as they need to be commissioned within 24 months from the date of the signing of their power purchase agreements.
The VGF quantum has been arrived at using a power storage cost of Rs 3 per unit, which when added to the solar power generation cost of Rs 2.50 per unit, brings it at par with Rs 5.50 per unit charged for other sources of energy available in the grid, said sources.
While reducing the levelized cost of energy, this would take care of grid stability challenges associated with renewable energy sources such as solar and wind whose generation pattern is unpredictable and intermittent; and creates fluctuations in the grid.
BESS will allow storage during excess generation so that stored power could be released during the time when renewable energy is not being generated. They would therefore aid the grid in ensuring real-time supply quality along with capability to store excess electricity over different time horizons (days or weeks)
Prime Minister Narendra Modi pledged at the COP26 summit to meet half of India's energy requirements from renewable energy by 2030 and boost non-fossil fuel power generation capacity to 500 gigawatts (GW) by the end of this decade.
A Central Electricity Authority report forecasts a requirement of 27 GW of BESS and 10.1 GW of Pumped Storage Systems by 2030 for an optimal power generation mix.
Though the scheme has in-principle approval of the Department of Expenditure (DoE), Power Ministry is pushing this proposal as its deviates from DoE's VGF scheme which gives such funding only to private sector and also because it exceeds the 20 percent VGF cap set by the Department of Economic Affairs.
To neutralise these exemptions, the Ministry has proposed that power from such VGF-funded BESS projects would be first offered to state distribution companies where disbursement would be up to 85 percent, before making the rest available to others.
BESS are expected to help increase the availability of green energy in the grid and in reducing the power shortages, outages and carbon emissions that have significance for all in the society, especially the poor and the vulnerable.
