India's VGF Program Boosts Battery Energy Storage
The Viability Gap Funding (VGF) program for Battery Energy Storage Systems (BESS) recently introduced in India has received widespread industry approval due to its potential to impact system costs, demand, and manufacturing in the country. The VGF program, approved by the Union Cabinet in September 2023 with an initial allocation of Rs.94 billion ($1.1 billion), designates Rs.37.6 billion ($452 million) as budgetary assistance to facilitate 4 GWh of BESS projects by 2030-31. Key figures in the battery industry have expressed optimism about VGF's ability to accelerate India's transition to clean and sustainable energy.
The VGF program is expected to provide a much-needed boost to standalone BESS projects, with 5,020 MWh of projects in the pipeline, according to Mercom India Research's Project Tracker. The assistance, contingent on project completion within an 18 to 24-month window, could cover up to 40% of the project's initial capital cost.
Industry leaders anticipate that VGF will drive substantial demand, optimise costs, and attract private-sector investments. With the Indian government planning to make energy storage mandatory for renewable projects of 5 MW and above, the timing of the VGF introduction is highly favourable. The integration of BESS into the energy ecosystem could improve power quality, balance the grid, and reduce costs, ultimately fostering a resilient and sustainable renewable power system.
VGF is set to act as a catalyst for India's sustainable energy future by attracting private sector investments, promoting high-quality project development, and spurring innovation in the renewable energy sector.
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