India announces Rs 5,400 crore funding scheme to build 30 GWh battery energy storage

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The Indian government on June 10 announced a viability gap funding (VGF) worth Rs 5,400 crore for developing 30 gigawatt hour (GWh) of new battery energy storage systems (BESS) to ensure round-the-clock renewable energy capacities in the country.

Announcing the approval of the scheme, Union minister for power Manohar Lal Khattar said it will be in addition to the already existing incentive worth Rs 3,700 crore under which 13.2 GWh of BESS is currently under implementation. The initiative will attract investments worth Rs 33,000 crore.

The VGF will be provided from the Power System Development Fund (PSDF). The scheme is targeted at 15 states which will receive allocations of 25 GWh and NTPC Ltd that will get 5 GWh. The Union minister said the first round of tender for the new VGF will be floated within 3 months.

"India is targeting 393 GW of renewable energy capacity (293 GW solar and 100 GW wind) by 2030.  But renewable energy is highly intermittent and needs energy storage solutions to ensure round the clock power supply and grid stability. Hence, BESS is essential especially to meet peak demand during non-solar hours," Khattar said in an interaction with reporters.

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The Central Electricity Authority (CEA) has estimated that India will need 37 GWh of BESS capacity by 2027, and 236 GWh by 2031-32. With the new VGF announcement India is poised to achieve a BESS capacity of 43.2 GW by 2027-28.

The rules of under the new VGF stated that projects must be commissioned within 18 months from the date of signing the Battery Energy Storage Purchase Agreement (BESPA) or Power Purchase Agreement (PPA). The BESS capacity should preferably have a two-hour discharge duration with an average of 1.5 cycles per day.

Inter-State Transmission Charges Extended

To push developers to build energy storage systems as urgently as renewable projects, the Union government on June 10 also approved a 100 percent waiver on Inter-State Transmission (ISTS) charges for BESS projects that are co-located or built within renewable energy projects and are commissioned by June 30, 2028.

A similar ISTS waiver has also been approved for pumped hydro storage projects which are commissioned by June 30, 2028. Pumped storage plants (PSPs) are hydroelectric power generation systems that use two water reservoirs at different elevations. They act like giant batteries for electricity storage. When the demand increases, the stored water is released to the lower reservoir, passing through turbines to generate electricity.

Plugging transmission bottlenecks

Several renewable projects across India are delayed or paused due to slow progress in transmission network which is needed to supply the green power generated at the site to different parts of the country.

Khattar on June 10 said India is set to revolutionize its power transmission with the rollout of an Ultra High Voltage Alternating Current (UHV AC) Transmission System with an investment of Rs 53,000 crore. Nine 1100 kV lines and ten substations have been identified for development by 2034, with testing facilities under development by the Central Power Research Institute.

As many transmission projects get delayed due to right of way (RoW) issues, the central government on March 21, 2025 increased the compensation for land used in laying transmission lines to ease the RoW issues. Compensation for the tower area has been increased from 85 percent to 200 percent of the land value, and for the RoW corridor from 15 percent to 30 percent, directly linking land value to market rates.  Haryana and Delhi have already adopted the new guidelines.