Empowering 15 states and NTPC in the energy transition, the government unveils the second phase of its VGF scheme, with ₹54 billion to unlock 30 GWh of battery storage.
A step towards India’s energy transition plans, the central Ministry of Power has unveiled an expanded Viability Gap Funding (VGF) scheme aimed at supporting 30 GWh of standalone battery energy storage systems (BESS).
This second phase of the VGF programme marks a major step up from the 2023 scheme, which initially backed 4 GWh and was later increased to 13.2 GWh. With the current funding round pegged at ₹54 billion, the initiative is projected to draw in around ₹330 billion in private investment, with project implementation planned through 2028.
According to a report by the JMK Research & Analytics, out of the total approved 30 GWh BESS capacity, 25 GWh will be distributed among 15 states. Rajasthan, Gujarat, and Maharashtra receive the highest allocations at 4000 MWh each, reflecting their strong renewable energy potential. Karnataka and Andhra Pradesh follow with 2000 MWh each. Next in line are Tamil Nadu, Madhya Pradesh, Uttar Pradesh, and Telangana, each allocated 1500 MWh, indicating a balanced focus across key energy-demand states.
States like Haryana, Kerala, Punjab, Chhattisgarh, Odisha, and Uttarakhand have been allocated 500 MWh each, suggesting a more gradual integration of storage solutions.
A dedicated 5 GWh portion has been assigned to state-run energy giant National Thermal Power Corporation (NTPC).
To improve commercial viability and project execution, the scheme has introduced several changes. The funding support has been revised to ₹1.8 million per MWh or 30% of the project’s capital cost—whichever is lower. This represents a significant decrease from the previous ₹4.6 million/MWh level, primarily due to declining battery prices.
Moreover, policy shifts include a reduced commissioning timeline of 18 months and longer contract terms of up to 15 years. Developers will also benefit from front-loaded disbursements, receiving 70% of VGF funds upon reaching commercial operation, thereby easing initial financial pressure.
For the first time, minimum technical requirements have been defined—each system must support at least two hours of energy storage and aim for 1.5 charge-discharge cycles per day.
With the Central Electricity Authority projecting demand for 37 GWh of storage by 2027 and 236 GWh by 2031-32, the expanded scheme is seen as critical in scaling grid-ready storage and ensuring reliability in India’s rapidly growing clean energy sector.
