New Delhi: The Union Cabinet, chaired by Prime Minister Narendra Modi, has approved a ₹14,500 crore Viability Gap Funding (VGF) Scheme for the development of Grid-Scale Energy Storage Systems with a targeted capacity of 92 GWh across India.
The scheme will be implemented over five years, from FY 2026-27 to FY 2030-31, and aims to accelerate the deployment of large-scale energy storage infrastructure to strengthen grid stability and facilitate renewable energy integration.
The scheme will support the development of 92 GWh of energy storage capacity that is yet to be commissioned across the country.
The proposed capacity will comprise 60 GWh of Hydro Pumped Storage Projects (PSP), 30 GWh of Battery Energy Storage Systems (BESS) and 2 GWh through emerging alternative energy storage technologies.
The initiative is expected to support the creation of new capacities equivalent to 170% of India’s present-day Grid-Scale Energy Storage Systems capacity.
It will also help the country meet its projected Grid-Scale Energy Storage Systems requirement of 411 GWh by 2031-32.
The approval marks a significant step towards strengthening India’s power sector infrastructure, facilitating large-scale integration of renewable energy and ensuring reliable, affordable and round-the-clock power supply.
It will also provide an impetus to domestic manufacturing of Battery Energy Storage Systems, reduce dependence on imports and enhance India’s long-term energy security.
₹97,600 Crore Investment Planned for Energy Storage Projects
The development of the proposed Grid-Scale Energy Storage Systems infrastructure is expected to attract a total estimated investment of ₹97,600 crore.
Under the scheme, 60 GWh of capacity will be developed through Hydro Pumped Storage Plants (PSP), while 30 GWh will come from Battery Energy Storage Systems (BESS).
The remaining 2 GWh will be developed using alternative energy storage technologies.
The ₹14,500 crore VGF support is intended to improve the financial viability of these projects and accelerate the deployment of large-scale energy storage infrastructure across the country.
The financial assistance is expected to help address project viability challenges and encourage investments in different energy storage technologies.
Tariff-Based Competitive Bidding for Energy Storage Projects
The allocation of energy storage capacity under the scheme will take place through a tariff-based competitive bidding process.
Public and private sector electricity distribution companies will be eligible to receive Viability Gap Funding support for Battery Energy Storage Systems and Hydro Pumped Storage Projects.
Meanwhile, projects based on alternative energy storage technologies will be implemented by both public and private sector entities.
Through this mechanism, the government aims to facilitate the development of different categories of Grid-Scale Energy Storage Systems and encourage participation from public and private sector players.
40% Domestic Content Requirement for Battery Storage Projects
A key objective of the VGF Scheme is to strengthen India’s domestic energy storage manufacturing ecosystem through demand-side financial support and reduce dependence on imported components.
To promote indigenous manufacturing, Battery Energy Storage System projects developed under the scheme will be subject to a minimum Domestic Content Requirement (DCR) of 40%.
The mandatory 40% domestic content requirement for BESS projects is expected to encourage domestic manufacturing, create opportunities for Indian industry and reduce import dependence.
The requirement will also complement existing supply-side incentives introduced to support battery manufacturing in the country.
By linking financial support with domestic content requirements, the scheme aims to strengthen India’s manufacturing capabilities in the energy storage sector.
Grid-Scale Energy Storage Systems to Strengthen Renewable Energy Integration
The scheme represents an important intervention towards building a flexible, resilient and future-ready electricity system.
Accelerating the deployment of Grid-Scale Energy Storage Systems will facilitate greater utilisation of renewable energy and help address the variability associated with renewable energy generation.
Energy storage infrastructure will also reduce dependence on conventional power generation for balancing round-the-clock electricity supply.
The initiative is expected to strengthen grid stability, improve renewable energy integration and support the availability of reliable and affordable electricity.
By developing large-scale battery storage, pumped storage and alternative energy storage capacities, the scheme aims to improve the flexibility of India’s electricity system.
The ₹14,500 crore Viability Gap Funding Scheme is also expected to encourage domestic manufacturing, enhance India’s energy security and support the country’s transition towards a more sustainable power infrastructure.
