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Govt plans additional Rs 5,400 crore VGF to create 30 GWh battery storage

The Centre is set to introduce an additional viability gap funding (VGF) package of Rs 5,400 crore for establishing 30 GWh battery energy storage system (BESS) capacity to ensure round-the-clock renewable energy availability, Union Minister for Power Manohar Lal Khattar said on Tuesday. This will be in addition to the existing incentive of Rs 3,700 crore, under which 13.2 GWh of BESS is currently being implemented. The move is expected to attract investments worth Rs 33,000 crore. The minister, at a press briefing, also announced an extension of the 100 per cent waiver on inter-state transmission system (ISTS) charges for BESS and storage projects until 30 June 2028. The exemption will apply to pumped storage projects awarded and battery storage systems commissioned before the deadline. Pumped storage plants (PSPs) are hydroelectric power generation systems using two water reservoirs at different elevations. They function as giant batteries for electricity storage. When demand increases, stored water is released to the lower reservoir through turbines to generate electricity. With an investment of Rs 53,000 crore, the government will roll out the Ultra High Voltage Alternating Current (UHVAC) transmission system to reinforce grid infrastructure. Nine 1,100 kV lines have been identified for high-voltage transmission and will be developed by 2034. Testing facilities for these lines and associated equipment are being developed by the Central Power Research Institute. Khattar also informed reporters that the compensation structure under the Right of Way (RoW) rules has been revised to facilitate infrastructure rollout. Compensation for tower area has increased from 85 per cent to 200 per cent of land value, and for the RoW corridor from 15 per cent to 30 per cent, directly linking land value to market rates. Haryana and Delhi have already adopted the new guidelines issued on 21 March 2025. Regarding VGF, the funding will be sourced from the Power System Development Fund (PSDF). The scheme targets 15 states, which will receive 25 GWh collectively, while NTPC Ltd will receive 5 GWh. Khattar said the first round of tender under the new VGF scheme will be floated in three months. 'India is targeting 393 GW of renewable energy capacity (293 GW solar and 100 GW wind) by 2030, but renewable energy is highly intermittent and needs energy storage solutions to ensure round-the-clock power supply and grid stability. Therefore, BESS is essential, especially to meet peak demand during non-solar hours,' he said. The Central Electricity Authority (CEA) estimates that India will require 37 GWh of BESS capacity by 2027 and 236 GWh by 2031–32. With the new VGF announcement, India is poised to achieve a BESS capacity of 43.2 GWh by FY28.