India Energy Storage Alliance (IESA) has welcomed the government’s announcement of the second tranche of the Viability Gap Funding (VGF), which aims to significantly boost the development of standalone Battery Energy Storage Systems (BESS) throughout the country. This initiative aligns with the government’s ambitious goal of achieving 30 GWh of energy storage capabilities distributed among 15 states, with support from NTPC. This scheme aims to attract an investment of Rs 33,000 crore, fulfilling the country’s BESS requirements by 2028. IESA believes that India Energy Storage Week 2025 will further accelerate this initiative by bringing together industry leaders, stakeholders, and investments from around the globe.
A VGF of INR 1.8 million (~$21,043)/MWh will be provided to support the development of 30 GWh of BESS capacity under this tranche. The funding will be sourced from the Power System Development Fund (PSDF), with a total financial outlay of INR 54 billion (~$631.30 million). With budgetary support through the Power System Development Fund (PSDF) and defined guidelines for project implementation, this initiative promises to enhance energy security and facilitate optimal utilization of existing thermal generation and transmission infrastructure to meet electricity demands during non-solar hours. As the need for BESS is projected to grow, reaching 37 GWh by 2027 and 236 GWh by 2032 according to the Central Electricity Authority (CEA), the timely implementation of these measures is crucial for the future of energy storage in India.
Vinayak Walimbe, Managing Director of Customized Energy Solutions (CES) says, “India is at a pivotal moment in its energy transition, and the government’s commitment to enhance Battery Energy Storage Systems (BESS) is a game-changer. The second tranche of Viability Gap Funding will not only drive investment but also foster innovation and collaboration across the energy sector. By aligning resources and stakeholders, we can unlock the full potential of renewable energy and ensure a more resilient and sustainable power grid for the future.
The VGF will be distributed in three phases. The initial 20% will be allocated upon achieving financial closure, contingent upon the provision of a bank guarantee. Fifty percent of the funds will be granted on the commercial operation date (COD), and the remaining 50% will be released after the successful completion of one year post-COD. Under this framework, developers will have the flexibility to adjust the discharge duration and cycle count according to their project’s specific requirements. The allocation of BESS projects will occur through a tariff-based competitive bidding process. Contracts will be awarded under a build-own-operate or build-own-operate-transfer model, typically spanning 12 to 15 years. The tariffs for the BESS may be expressed in INR /MW/Month or INR /kWh.
Debmalya Sen, President of the India Energy Storage Alliance, further highlighted, “The requirement under the Guideline for the Power Supply Agreement (PSA) to be signed within nine months is a significant development that will expedite project signing. However, the tariff adoption process by the commission is delayed in many cases, a delay of around a year after a project is awarded is seen in recent tenders, which is a concerning issue as it delays implementation. Moreover, the reduction in viability gap funding (VGF) support will bring greater financial pressure on developers, requiring them to demonstrate higher net worth, especially the new players. I firmly believe that IESW will serve as a key platform to accept recommendations and suggestions from industry leaders globally.”
IESW has served as India’s premier international platform for stakeholders across the battery manufacturing, energy storage, e-mobility, battery recycling, and green hydrogen sectors in India for over a decade. The 11th edition of India Energy Storage Week (IESW), taking place in Delhi from July 8-10, aims to boost India’s energy transition and global partnerships to further accelerate the government’s vision for the country’s battery energy storage systems (BESS) development in India. Over 20 countries, 100 regulators and policymakers, 200 partners and exhibitors, 150 speakers, 1000 delegates, and 10,000 visitors, along with delegations from France, the UK, the USA, Canada, Finland, Israel, and Korea will attend IESW.