New Delhi, Nov 4: India is set to accelerate its transition towards renewable energy with the Union Cabinet approving a Rs 14,500-crore Viability Gap Funding (VGF) scheme to develop 92 GWh of additional grid-scale energy storage capacity by 2031.
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The scheme, approved on Wednesday at a Cabinet meeting chaired by Prime Minister Narendra Modi, will be implemented over five years, from FY 2026-27 to 2030-31.
The initiative aims to strengthen the country’s electricity infrastructure, improve the integration of renewable energy into the national grid and ensure a more reliable supply of affordable electricity.
The proposed 92 GWh capacity will significantly expand India’s existing grid-scale energy storage infrastructure, supporting the country’s projected requirement of 411 GWh by 2031-32.
Pumped storage and battery projects to get a major boost
Under the scheme, the government plans to support the development of energy storage projects across three technology categories:
60 GWh: Hydro Pumped Storage Plants (PSP).
30 GWh: Battery Energy Storage Systems (BESS).
2 GWh: Alternative energy storage technologies.
The projects are expected to attract an estimated total investment of Rs 97,600 crore.
The VGF mechanism will help bridge the financial viability gap in these capital-intensive projects, making them more attractive to investors and accelerating their implementation.
Financial support through competitive bidding
Energy storage capacity under the scheme will be allocated through a tariff-based competitive bidding process.
Public and private sector electricity distribution companies will be eligible for VGF assistance for battery storage and pumped storage projects.
Projects based on alternative energy storage technologies can be undertaken by both public and private sector entities.
The funding support is intended to reduce the initial financial burden on developers and encourage greater participation from investors in India’s emerging energy storage sector.
Domestic manufacturing gets a push
A major focus of the initiative is to strengthen India’s domestic battery manufacturing ecosystem and reduce dependence on imported components.
To promote indigenous production, Battery Energy Storage System projects will be required to meet a minimum Domestic Content Requirement (DCR) of 40%.
This provision is expected to create fresh opportunities for Indian manufacturers, encourage investment in domestic supply chains and complement existing government incentives for battery manufacturing.
The move is also aimed at building technological capabilities and improving India’s competitiveness in the global energy storage market.
Why large-scale energy storage matters
As India increases its reliance on solar and wind power, managing fluctuations in renewable electricity generation has become an important challenge for the power sector.
Solar power generation is concentrated during daylight hours, while electricity demand often remains high during evening and night-time periods. Wind generation can also vary depending on weather conditions.
Grid-scale energy storage systems can address these challenges by storing surplus electricity when generation is high and supplying it when demand rises or renewable generation falls.
The proposed infrastructure is expected to improve grid stability, reduce renewable energy wastage and support a more dependable round-the-clock electricity supply.
Strengthening India’s energy security
The Cabinet-approved scheme represents a significant investment in India’s future power infrastructure.
By supporting pumped hydro, battery storage and alternative technologies, the government aims to develop a flexible electricity system capable of accommodating a growing share of renewable energy.
The initiative is also expected to stimulate private investment, strengthen domestic manufacturing and generate opportunities across the energy and infrastructure sectors.
With a targeted addition of 92 GWh of storage capacity by 2031, the scheme marks an important step towards India’s long-term clean energy ambitions and the broader goals of Atmanirbhar Bharat and Viksit Bharat.