Cabinet Approves INR 14,500 Crore VGF Scheme for 92 GWh Energy Storage

The Union Cabinet has approved a Viability Gap Funding (VGF) scheme worth INR 14,500 crore to support the development of 92 GWh of grid-scale energy storage capacity across India between FY 2026-27 and FY 2030-31.

The scheme aims to accelerate the deployment of energy storage infrastructure, strengthen grid stability and facilitate the integration of renewable energy into the electricity network. It will support 30 GWh of Battery Energy Storage Systems (BESS), 60 GWh of Hydro Pumped Storage Projects (PSP) and 2 GWh of alternative energy storage technologies.

The proposed projects are expected to attract a total investment of INR 97,600 crore. The VGF support is intended to improve project financial viability and accelerate the development of large-scale storage infrastructure. The 92 GWh capacity will comprise new storage projects yet to be commissioned and is equivalent to 170 percent of India's existing grid-scale energy storage capacity.

The initiative is expected to contribute towards meeting India's projected grid-scale energy storage requirement of 411 GWh by 2031-32.

Energy storage capacity will be allocated through a tariff-based competitive bidding process. Public and private sector electricity distribution companies will be eligible to receive VGF support for BESS and pumped storage projects. Projects based on alternative storage technologies will be implemented by both public and private sector entities.

As part of the scheme, BESS projects will be subject to a minimum Domestic Content Requirement (DCR) of 40 percent. The provision is aimed at encouraging domestic manufacturing of battery storage components, reducing import dependence and strengthening India's energy storage supply chain.

Commenting on this, Anujesh Dwivedi, Partner, Deloitte India, said, "With the sharp rise in pace of RE generation capacity addition, especially over the last two years, scaling up energy storage has become an immediate priority for the Indian power system. The focus on pumped hydro, in addition to BESS and alternative technologies is the key highlight of the new VGF Scheme."

Kannan Krishnan, Managing Director, Jakson Green, said, “The Union Cabinet's approval of the INR 14,500 crore Viability Gap Funding scheme for 92 GWh of grid-scale energy storage marks a defining moment in India's energy journey. India is now moving from renewable energy to reliable energy. Energy storage is the need of the hour. Clean sources already meet more than half of India's power generation, but the sun sets just as demand peaks. Storage will convert intermittent renewables into round-the-clock power.

“Green Energy Corridor Phase-III builds the highways for clean power; storage ensures that power flows round the clock. Together, they address transmission and intermittency in one stroke, while laying a strong foundation for the National Green Hydrogen Mission. The 40 percent domestic content requirement for battery storage, along with the push on critical mineral processing, will strengthen indigenous manufacturing and reduce import dependence. Energy security and economic security, advancing together.”

The scheme will complement existing supply-side incentives for battery manufacturing by creating domestic demand for locally manufactured components. It is also expected to provide opportunities for Indian manufacturers and support the development of an indigenous energy storage ecosystem.

The government said that the initiative would help address the variability of renewable energy generation, improve the utilisation of renewable power and reduce dependence on conventional generation for balancing requirements. The expansion of grid-scale storage capacity is also expected to support reliable and affordable round-the-clock electricity supply.