Key Takeaways
- The Indian government plans a new viability gap funding scheme for energy storage projects with a budget of around ₹15,000 crore.
- This initiative targets a total storage capacity of 112 GWh, including battery and pumped storage projects.
- The scheme aims to enhance grid stability and support India’s goal of achieving 500 GW of non-fossil fuel capacity by 2030.
New Funding Scheme for Energy Storage Projects
The Indian government is developing a new viability gap funding (VGF) scheme aimed at supporting energy storage projects totaling 112 gigawatt-hours (GWh), with an estimated budget of ₹15,000 crore. This funding initiative includes a combination of 50 GWh for battery energy storage projects, 60 GWh dedicated to pumped storage projects, and 2 GWh for innovative storage technologies.
Previously, a concept note regarding the VGF scheme was submitted by the power ministry to the Department of Expenditure, and the draft proposal is now undergoing inter-ministerial consultations.
The push for this scheme aligns with India’s objective to enhance its energy storage infrastructure, which is crucial for accommodating a larger share of renewable energy in the national grid and managing increasing peak demand. This summer has seen record electricity consumption in India, resulting in heightened post-sunset demand that necessitates efficient generation and storage solutions.
Additionally, the initiative is likely to bolster pumped storage projects, viewed as essential for long-duration energy storage and for balancing the generation from intermittent renewable sources. India has set an ambitious target of 500 GW of non-fossil fuel energy capacity by 2030, which requires substantial storage solutions to successfully integrate renewable energy into the grid.
Storage systems are vital to maintaining grid stability, addressing evening peak demand, and minimizing the curtailment of renewable energy. While an existing VGF scheme specifically for battery storage is still in implementation, the new proposal aims to promote large-scale adoption among stakeholders, especially in light of the existing variability in the energy grid.
The initial VGF scheme was launched in two phases, with the first phase supporting 13.2 GWh of storage with 30% capital expenditure assistance, followed by a second phase aimed at 30 GWh with 16% funding. The first phase has been fully tendered, while the second is currently underway. However, neither of these prior phases incorporated a pumped hydro storage component.
Looking ahead, the Central Electricity Authority has projected that a storage capacity of 235 GWh will be necessary by 2029-30, and an even more substantial 888 GWh by 2035-36. This projected growth in storage capacity underscores the importance of the proposed VGF scheme in supporting India’s energy transition toward a more sustainable and reliable power infrastructure.
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