The Union Cabinet approved the Scheme for Viability Gap Funding (VGF) for development of Battery Energy Storage Systems (BESS).
Key points
- The approved scheme envisages development of 4,000 MWh of BESS projects by 2030-31, with a financial support of up to 40% of the capital cost as budgetary support in the form of Viability Gap Funding (VGF).
- Designed to harness the potential of renewable energy sources such as solar and wind power, the scheme aims to provide clean, reliable, and affordable electricity to the citizens.
- The VGF for development of BESS Scheme, with an initial outlay of Rs.9,400 crore, including a budgetary support of Rs.3,760 crore, signifies the government’s commitment to sustainable energy solutions.
- By offering VGF support, the scheme targets achieving a Levelized Cost of Storage (LCoS) ranging from Rs. 5.50-6.60 per kilowatt-hour (kWh), making stored renewable energy a viable option for managing peak power demand across the country.
- The VGF shall be disbursed in five tranches linked with the various stages of implementation of BESS projects.
- To ensure that the benefits of the scheme reach the consumers, a minimum of 85% of the BESS project capacity will be made available to Distribution Companies (Discoms).
About viability gap funding
- In order to remove the shortcoming and to bring in private sector resources and techno-managerial efficiencies, the Government is promoting Public Private Partnerships (PPP) in infrastructure development through a special facility envisaging support to PPP projects through ‘viability gap funding’.
- Primarily, this facility is meant to reduce capital cost of the projects by credit enhancement, and to make them viable and attractive for private investments through supplementary grant funding. Provisions for this facility is made on an year to year basis.
