New Delhi: The Union Cabinet, chaired by Prime Minister Narendra Modi, has approved the Viability Gap Funding (VGF) Scheme for Development of Grid-Scale Energy Storage Systems, with financial support of Rs 14,500 crore for the period FY 2026-27 to FY 2030-31.
The scheme aims to support the development of 92 GWh of new energy storage capacity across the country. The proposed capacity is equivalent to around 170% of India's existing grid-scale energy storage capacity and will contribute towards meeting the estimated requirement of 411 GWh by 2031-32.
The initiative is intended to strengthen power sector infrastructure, support the integration of renewable energy and improve the availability of reliable and affordable electricity around the clock.
92 GWh capacity across three technologies
The scheme envisages the development of energy storage capacity through three categories:
Hydro Pumped Storage Plants (PSP): 60 GWh
Battery Energy Storage Systems (BESS): 30 GWh
Alternative energy storage technologies: 2 GWh
The projects are expected to involve a total investment of around Rs 97,600 crore.
VGF support will help improve the financial viability of these projects and encourage investment in large-scale energy storage infrastructure.
Projects to be allocated through competitive bidding
Energy storage capacity will be allocated through a tariff-based competitive bidding process.
Public and private sector electricity distribution companies will be eligible to receive VGF support for BESS and pumped storage projects. Projects based on alternative energy storage technologies will be implemented by both public and private sector entities.
40% domestic content requirement for battery projects
A key feature of the scheme is its focus on strengthening India's domestic energy storage manufacturing ecosystem and reducing dependence on imported components.
Battery Energy Storage System projects will be required to meet a minimum Domestic Content Requirement (DCR) of 40%. The provision is intended to encourage local manufacturing, create opportunities for Indian industry and complement existing supply-side incentives for battery manufacturing.
Supporting renewable energy integration and grid stability
Large-scale energy storage can help address the variability of solar and wind power generation by storing electricity when supply is available and releasing it when demand rises or renewable generation falls.
The proposed capacity is expected to improve grid stability, enable greater utilisation of renewable energy and reduce reliance on conventional power generation for balancing electricity supply.
The scheme also seeks to strengthen domestic manufacturing and improve India's long-term energy security, in line with the broader objectives of Atmanirbhar Bharat and Viksit Bharat.
