Context:
Recently, The Union Cabinet has approved a Viability Gap Funding (VGF) scheme to promote grid-scale Energy Storage Systems (ESS) during 2026–27 to 2030–31. The scheme aims to develop 92 GWh of energy storage capacity to improve grid stability, integrate renewable energy and strengthen India's energy security.
Key Features of the Scheme:
The scheme targets 92 GWh of energy storage capacity, comprising 30 GWh of Battery Energy Storage Systems (BESS), 60 GWh of Pumped Hydro Storage (PHS) and 2 GWh of emerging storage technologies. The reported financial outlay is ₹17,500 crore, while the estimated VGF support is ₹14,500 crore. The total investment required is approximately ₹97,600 crore. The scheme will encourage private-sector participation and domestic manufacturing.
What are Grid-Scale Energy Storage Systems?
Grid-scale energy storage systems are large installations connected to electricity transmission or distribution networks. They store surplus electricity and release it during periods of high demand or low renewable energy generation. Major technologies include battery storage, pumped hydro storage, flow batteries and solid-state batteries. These systems help maintain the balance between electricity generation and consumption.
About Battery Energy Storage Systems (BESS):
BESS stores electricity through electrochemical processes and releases it when required. It plays an important role in renewable energy integration by storing surplus solar and wind power. It also supports peak demand management, grid balancing, frequency regulation and energy arbitrage. Lithium Iron Phosphate (LFP) batteries are increasingly preferred for grid-scale applications due to their thermal stability, longer cycle life and reduced dependence on nickel and cobalt.
About Pumped Storage Hydropower (PSP):
Pumped Storage Hydropower stores energy through gravitational potential energy. During surplus electricity generation, water is pumped from a lower reservoir to an upper reservoir. During peak demand, the stored water is released through turbines to generate electricity. It offers long-duration energy storage, long operational life and large-scale grid balancing capabilities.
What is Viability Gap Funding (VGF)?
VGF is government financial assistance provided to infrastructure projects that are economically desirable but financially unviable on purely commercial terms. It reduces initial capital costs, improves project viability and encourages private investment through Public-Private Partnerships (PPPs).
Significance for India
The scheme will facilitate greater integration of renewable energy and reduce dependence on fossil-fuel-based power generation. It will improve electricity reliability, attract private investment, generate employment and promote indigenous battery manufacturing under the Atmanirbhar Bharat initiative. It will also support India's climate commitments and the target of achieving net-zero emissions by 2070.
India's Energy Storage Target:
According to the Central Electricity Authority (CEA), India requires approximately 411.4 GWh of energy storage capacity by 2031–32, comprising 236.22 GWh of battery storage and 175.18 GWh of pumped storage. This expansion is essential for supporting India's growing renewable energy capacity.
Conclusion:
Energy storage systems are essential for transforming India's electricity sector into a reliable, flexible and renewable-energy-driven system. The proposed scheme can accelerate renewable energy integration, strengthen domestic manufacturing and improve energy security. Effective implementation, technological innovation and sustainable resource management will be crucial for achieving India's clean energy transition and climate commitments.
