Viability Gap Funding for development of BESS

September 7, 2023

The Union Cabinet has given the green light to the Scheme for Viability Gap Funding (VGF) aimed at fostering the development of Battery Energy Storage Systems (BESS). This ambitious scheme aspires to generate 4,000 MWh of BESS projects by 2030-31, backed by up to 40% capital cost support in the form of VGF. It represents a crucial stride in the government’s pro-environment initiatives, expected to reduce the costs of battery storage systems, thus enhancing their viability.

Primarily designed to tap into the potential of renewable energy sources like solar and wind power, the scheme seeks to provide clean, reliable, and cost-effective electricity to citizens. With an initial outlay of Rs. 9,400 crore, including budgetary support of Rs. 3,760 crore, the VGF for BESS signifies the government’s commitment to sustainable energy solutions. It aims to achieve a Levelized Cost of Storage (LCoS) ranging from Rs. 5.50-6.60 per kWh, making stored renewable energy a practical choice for managing peak power demand.

What is the main objective of the BESS scheme, and how does it benefit consumers?

The BESS scheme aims to provide clean, reliable, and affordable electricity by harnessing renewable energy. At least 85% of BESS capacity will be accessible to Distribution Companies (Discoms), enhancing grid integration and reducing power wastage.

How will the VGF grants be allocated to BESS developers, and what’s the significance of this approach?

BESS developers will be selected through a transparent competitive bidding process. This fosters healthy competition and encourages investment, creating opportunities for associated industries and ensuring a level playing field.

How does the BESS scheme contribute to minimizing costly infrastructure upgrades in the power sector?

By optimizing the utilization of transmission networks and integrating renewable energy efficiently, the BESS scheme reduces the need for costly infrastructure upgrades, ultimately benefiting consumers and the environment.

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