India’s VGF scheme enough to fund Indian BESS deployment

The country was urged to accelerate the distribution of funding available.

India's existing viability gap funding (VGF) scheme of INR 3,760 crore provides adequate support to bridge the current cost gap of INR 2,637 crore in the country’s battery energy storage system (BESS) sector.

According to a study by the International Institute for Sustainable Development, it will not be a smart move to inject more financing in the sector. What the government should do is accelerate the pace of BESS auctions and spread the funding more thinly across projects and beyond the 4 gigawatt-hour capacity by 2030/2031.

The study also told the government to reduce the Goods and Services Tax (GST) on BESS components, which would make the sector more cost-competitive.

There is also a need to implement power market reforms, and establish other
regulatory policies to incentivise investment in BESSs to mobilise additional investment.

India should also allocate funding for training and capacity building of state-level actors such as State Electricity Regulatory Commissions, State Load Dispatch Centres, and distribution companies (discoms) in BESS project development and preparing resource adequacy plans.