VIABILITY GAP FUNDING SCHEME FOR GRID-SCALE ENERGY STORAGE

05 Nov 2026

Tags: Prelims   Current events of national and international importance

Source: The Indian Express

Context: Union Cabinet approved a ₹17,500 crore Viability Gap Funding (VGF) scheme to promote grid-scale energy storage systems during 2026–27 to 2030–31, supporting renewable energy integration and grid stability.

Key Features

• Target Capacity: 92 Gigawatt-hours (GWh).
  • Battery Energy Storage Systems (BESS): 30 GWh.
  • Pumped Hydro Storage (PHS): 60 GWh.
  • Emerging storage technologies: 2 GWh.
• Total Investment: Approximately ₹97,600 crore, including ₹14,500 crore VGF support.
• Allocation: Through tariff-based competitive bidding.
• Eligible Entities: Public and private sector electricity distribution companies for BESS and PHS; public and private entities for alternative storage technologies.
• Domestic Content Requirement (DCR): Minimum 40% for BESS projects.

Energy Storage Technologies

• Battery Energy Storage Systems (BESS):
  • Store electricity chemically and release it when required.
  • Lithium-ion batteries, particularly Lithium Iron Phosphate (LFP) batteries, dominate grid-scale storage.
• Pumped Hydro Storage (PHS):
  • Surplus electricity pumps water from a lower to an upper reservoir.
  • During peak demand, water flows downhill through turbines to generate electricity.

Significance

• Stores surplus solar and wind energy and supplies electricity when generation is low or demand peaks.
• Improves grid stability and reliability.
• Reduces renewable energy wastage and supports India's clean energy transition.

Prelims Pointers

• VGF: Government financial assistance to make economically desirable but financially unviable infrastructure projects commercially viable.
• Energy Storage Target: India aims for 411 GWh storage capacity by 2031–32.
• Grid-scale Storage: Enables balancing of intermittent renewable energy supply with electricity demand.