The Union Cabinet has given its consent to the ‘Viability Gap Funding’ scheme (VGF), an initiative set in motion to stimulate the growth of Battery Energy Storage Systems (BESS). This pushes forward the use of renewable energy resources, allowing power from the sun and wind to be captured and stored, then released at a time when the demand for electricity is greatest.
What is Viability Gap Funding?
Viability Gap Funding is a financial instrument wielded by governments to deal with the disparity between the cost of infrastructural projects and their economic feasibility. It’s a tool commonly used in projects that are deemed financially unattractive or uneconomical due to factors such as high capital costs, low potential revenue or lengthy gestation periods before reaching maturity.
The Viability Gap Funding Scheme for Battery Storage
As part of the scheme, the government commits to providing financial backing amounting to 40% of the capital cost via VGF. This will lead to a considerable reduction in the cost of battery storage systems and enhance their affordability, making them a more viable option.
The initiative is strategically engineered to tap into the capabilities of renewable energy sources such as solar and wind power to offer citizens a reliable, clean, and affordable power supply. In order to guarantee that the perks of the scheme trickle down to consumers, at least 85% of the BESS project capacity will be made accessible to Distribution Companies (Discoms).
This strategy not only strengthens the amalgamation of renewable energy into the electricity grid but also curbs waste and optimizes the utilization of transmission networks, thereby reducing the necessity for expensive infrastructure upgrades.
VGF Scheme Objectives
Aiming to achieve a Levelized Cost of Storage (LCoS) ranging from Rs. 5.50-6.60 per kilowatt-hour (kWh), the prime objective of the VGF initiative is to foster the development of 4,000 megawatt-hour (MWh) of BESS projects by 2030-31. The cost-effectiveness of the scheme is expected to make renewable energy storage a preferred choice for managing peak power demand nationwide.
The Significance of the VGF Scheme
The Government’s commitment to pioneering clean and green energy solutions remains steadfast. The Battery Energy Storage Systems Scheme, powered by VGF, stands as a symbol of this dedication. The heat is on to increase the adoption of battery storage while harnessing the power of renewable energy.
This initiative aims to construct a brighter, greener future for every citizen, while keeping in sync with worldwide sustainability goals, making the BESS Scheme a key element in promoting renewable energy usage in India.
