Battery Energy Storage Boost: Funding Challenges & Budget Adjustments

The Viability Gap Funding (VGF) Scheme for Battery Energy Storage Systems (BESS) faced a setback as no funds were released in FY25 due to projects' failure to achieve financial closure. Revised budget allocations have been made to adapt to falling battery costs, while the scheme's capacity has expanded.

No funds were released under the Viability Gap Funding (VGF) Scheme for Battery Energy Storage Systems (BESS) in FY25, as reported to Parliament on Thursday. The setback was due to none of the projects reaching financial closure.

In September 2023, the Union Cabinet approved the VGF Scheme to support BESS development. Minister of State for Power, Shripad Naik, explained that according to the scheme guidelines, 10% of the VGF is intended for disbursement after financial closure. As this was not achieved, there were no expenditures during 2024-25.

Despite an initial budgetary provision of Rs 96 crore for 1,000 MWh of BESS in 2024-25, revised allocations were made in response to decreasing BESS costs. The funding reduced from Rs 96 lakh to Rs 46 lakh per MWh, and the scheme's capacity increased from 4,000 MWh to 13,200 MWh. Oversight of the scheme is managed by the Central Electricity Authority with the Ministry of Power ensuring efficient fund utilization.

(With inputs from agencies.)