The Ministry of Power (MoP) has raised the Battery Energy Storage System (BESS) capacity target under the Viability Gap Funding (VGF) program from 4,000 MWh to 13,200 MWh, citing a decline in storage costs. All states and implementing agencies have been directed to award BESS contracts by June 2025, ensuring program completion by May 2027.
The expanded target includes allocations under three components:
Market Component: NTPC Vidyut Vyapar Nigam (NVVN) has been allocated 1,000 MWh under the first tranche, with a VGF of Rs 4.6 million/MWh. SECI will manage an additional 1,200 MWh under Market Mechanism Tranche-II, with a VGF of Rs 2.7 million/MWh.
State Component: 6,000 MWh has been allocated to Rajasthan, Tamil Nadu, Karnataka, Gujarat, Maharashtra, Telangana, Bihar, and Kerala, with a VGF of Rs 2.7 million (~$31,150)/MWh.
Central PSU Component: 5,000 MWh has been assigned to NVVN, NHPC, and SJVN, also with a VGF of Rs 2.7 million/MWh.
Bidding for 500 MW/1,000 MWh under Tranche-I was completed in October 2024, and NVVN signed the Battery Energy Storage Purchase Agreement in December. Under the State Component, awards have been issued for 2,500 MWh, covering 1,000 MWh in Gujarat, 500 MWh in Maharashtra, and 1,000 MWh in Rajasthan.
Initially, the VGF program aimed to support at least 4,000 MWh of BESS by 2028 with a capital subsidy of Rs 37.6 billion. Approved in September 2023 with a total allocation of Rs 94 billion, the program’s operational guidelines were released in March 2024, VGF disbursement follows a structured five-tranche model, with 10% at financial closure, 45% at the commercial operation date (COD), and the remaining 45% distributed over three years post-COD.
