The Union Cabinet has approved a Viability Gap Funding (VGF) Scheme for Grid-Scale Energy Storage Systems with financial support of ₹14,500 crore for FY 2026–27 to FY 2030–31. The initiative aims to expand energy storage capacity, support renewable energy integration and improve the reliability of India’s electricity grid.
Key Features of the Scheme
The scheme targets the development of 92 GWh of new grid-scale energy storage capacity, supporting India’s broader goal of achieving 411 GWh of storage capacity by 2031–32.
The proposed capacity includes:
- 60 GWh from Hydro Pumped Storage Projects (PSPs)
- 30 GWh from Battery Energy Storage Systems (BESS)
- 2 GWh from emerging energy-storage technologies
Projects will be allocated to eligible public and private-sector electricity distribution companies through a tariff-based competitive bidding process.
Promoting Domestic Manufacturing
To strengthen India’s energy-storage manufacturing ecosystem, BESS projects supported under the scheme will have to meet a minimum 40% Domestic Content Requirement (DCR).
The demand-side support is intended to complement existing manufacturing incentives and reduce dependence on imported storage technologies and components.
Why is Energy Storage Important?
India’s growing renewable-energy capacity is dominated by variable sources such as solar and wind. Their output changes according to weather and time of day, creating challenges for grid management.
Large-scale storage can help balance electricity supply and demand, store surplus renewable power and release it when required. This can support more reliable round-the-clock electricity supply while reducing dependence on conventional fossil-fuel generation.
What is Viability Gap Funding?
VGF is a government capital grant provided to infrastructure projects that are socially or economically important but may not be financially viable on their own.
By reducing the gap between high initial investment and expected commercial returns, VGF can make projects attractive to private investors while supporting affordable and reliable infrastructure.
Significance of the Scheme
The programme is expected to attract around ₹97,600 crore in total investment. By expanding storage infrastructure and encouraging domestic manufacturing, it can strengthen grid stability, accelerate renewable-energy deployment and contribute to India’s long-term energy security.
FAQs - VGF Scheme
What is the VGF Scheme for Grid-Scale Energy Storage?
According to the article, it provides ₹14,500 crore in financial support for FY 2026–27 to FY 2030–31 to expand energy storage and improve electricity-grid reliability.
How much storage capacity does the scheme target?
The scheme targets 92 GWh: 60 GWh from pumped storage, 30 GWh from battery storage and 2 GWh from emerging technologies.
What is Viability Gap Funding (VGF)?
VGF is government financial assistance that helps make economically or socially important infrastructure projects commercially viable by reducing their funding gap.
How does the scheme promote domestic manufacturing?
The article states that supported Battery Energy Storage Systems must meet a minimum 40% Domestic Content Requirement, encouraging domestic production.
Why is grid-scale energy storage important?
Storage saves surplus electricity for later use, balances supply and demand, and helps integrate variable solar and wind power into the grid.
