Viability Gap Funding (VGF) is a financial support mechanism provided by the government to enhance the economic viability of certain projects, making them more appealing to investors. Specifically, VGF caters to projects that hold social or economic significance but lack financial attractiveness without government backing.
The VGF initiative for Battery Energy Storage Systems (BESS) aims to foster the development of systems capable of storing energy generated from renewable sources such as solar and wind. This innovative approach aids in managing peak power demands, stabilizing the power grid, and ensuring a consistent and reliable energy supply.
The VGF scheme outlines an ambitious target of developing 4,000 MWh of BESS projects by the fiscal year 2030-31. This capacity is essential for supporting the integration of renewable energy into India's power grid.
The financial framework for the scheme includes an initial outlay of ₹9,400 crore, with ₹3,760 crore earmarked as budgetary support through Viability Gap Funding. This funding is intended to cover up to 40% of the capital costs associated with BESS projects, facilitating their development.
Through the VGF scheme, the goal is to achieve a Levelized Cost of Storage (LCoS) ranging between ₹5.50 and ₹6.60 per kilowatt-hour (kWh). This pricing structure is designed to make renewable energy storage more feasible and economically viable for distribution companies and end consumers alike.
Under the VGF scheme, a minimum of 85% of the developed BESS project capacity will be allocated to Distribution Companies (Discoms). This strategy ensures that the advantages of energy storage are widely distributed, thereby enhancing overall grid stability and efficiency.
BESS developers seeking VGF grants will be chosen through a competitive bidding process. This transparent method is intended to promote fairness and encourage participation from both public and private sector entities, ensuring a diverse set of contributors to the energy landscape.
BESS plays a vital role in India's energy strategy by enabling the storage of renewable energy, which in turn facilitates better supply and demand management, reduces energy wastage, and enhances the reliability of the energy system. These insights provide a foundational understanding of the Viability Gap Funding for BESS and underscore its strategic importance in bolstering India's renewable energy capabilities, ensuring energy availability during peak demand, and advancing the nation’s energy transition goals.
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