The Ministry of Power, Government of India, has unveiled the second tranche of the Viability Gap Funding (VGF) scheme aimed at accelerating the development of standalone Battery Energy Storage Systems (BESS) across the country. With a total budgetary allocation of ₹5,400 crore under the Power System Development Fund (PSDF), the initiative will support 30 GWh of BESS capacity nationwide. This round will support 25 GWh of BESS in 15 states and 5 GWh with NTPC.
Key Features of the Second VGF Tranche:
Total Financial Outlay & Support Mechanism:
- ₹5,400 crore allocated from PSDF.
- Financial support fixed at ₹18 lakh per MWh of battery capacity.
- Applicable to standalone BESS projects with a minimum of 2-hour discharge duration.
Capacity Distribution:
- Total target: 30 GWh.
- 25 GWh allocated to 15 Indian states:
- Rajasthan, Gujarat, Maharashtra: 4 GWh each.
- Karnataka, Andhra Pradesh: 2 GWh each.
- Tamil Nadu, Madhya Pradesh, Telangana, Uttar Pradesh: 1.5 GWh each.
- Haryana, Kerala, Punjab, Chhattisgarh, Odisha, Uttarakhand: 500 MWh each.
- 5 GWh allocated to NTPC for enhancing usage of existing thermal and transmission infrastructure, particularly during non-solar hours.
Project Development Timeline:
- Projects must be commissioned within 18 months from the date of signing the Battery Energy Storage Purchase Agreement (BESPA) or Power Purchase Agreement (PPA).
PPA Requirements:
- Developers must sign PPAs within 90 days from the date of issuance of the scheme guidelines to qualify for VGF support.
Proposal Submission Deadline:
- States must submit proposals within 60 days, identifying:
- Implementation agency
- Site location
- Proposed BESS capacity
- Relevant details for VGF screening and approval
Disbursement of Funds:
- VGF to be released in three stages:
- 20% upon financial closure
- 50% upon commissioning
- 30% after one year of successful operation
Operational Requirements:
- Each system must be capable of at least 2 hours of energy discharge.
- Designed to support an average of 1.5 charge/discharge cycles per day.
Contractual & Commercial Model:
- Tariff to be quoted in either INR/MW/month or INR/kWh.
- Projects to be awarded through tariff-based competitive bidding.
- Preference for a Build-Own-Operate (BOO) or Build-Own-Operate-Transfer (BOOT) model.
- PPA tenure should range from 12 to 15 years.
Strategic Purpose:
- Facilitate flexible, clean energy storage.
- Enhance grid reliability and efficiency by absorbing renewable energy.
- Reduce reliance on thermal generation during peak hours.
Future Outlook:
- As per Central Electricity Authority (CEA) estimates:
- India requires 37 GWh of BESS capacity by 2027.
- This need will rise sharply to 236 GWh by 2032.
This initiative signals a significant step in India’s roadmap toward grid decarbonization, reliable renewable energy integration, and sustainable infrastructure. By supporting both public sector units like NTPC and individual states, the scheme lays down a robust foundation for India’s battery storage ecosystem.
