India's Union Cabinet, chaired by Prime Minister Narendra Modi, has approved the VGF scheme for BESS development. The approved scheme envisages the development of 4 GWh of BESS projects by 2030-31, with financial support of up to 40% of the project’s capital cost in the form of VGF. The move is expected to bring down the cost of battery storage systems, increasing their viability.

The VGF for the development of the BESS scheme has an initial outlay of around $1.13 billion. By offering VGF support, the scheme targets achieving a levelized cost of storage (LCoS) ranging from INR 5.50/kWh to INR 6.60/kWh, making stored renewable energy a viable option for managing peak power demand across the country. The VGF shall be disbursed in five tranches linked with the various stages of BESS project implementation.

To guarantee consumer access to the scheme's advantages, BESS projects will allocate a minimum of 85% of their capacity to electricity distribution companies (discoms). This approach will bolster renewable energy integration into the electricity grid, curbing wastage and optimizing transmission network utilization. Consequently, it will diminish the necessity for expensive infrastructure upgrades.

The selection of BESS developers for VGF grants will follow a transparent, competitive bidding process, fostering equitable opportunities for both public and private sector entities.