Indian Cabinet eyes LCoS of ₹5.50-6.60 per kWh with viability gap funding for BESS

India has approved a scheme for Viability Gap Funding (VGF) for development of Battery Energy Storage Systems (BESS) in an attempt to reduce the cost of energy storage for power distribution companies and consumers.

In a release, the country's Press Information Bureau said the Cabinet had cleared the scheme, with an initial outlay of ₹9,400 crore, including budgetary support of ₹3,760 crore. Three facts of the approved scheme:

• Through VGF support, the scheme targets a Levelized Cost of Storage (LCoS) of ₹5.50-6.60 per kilowatt-hour (kWh), thus making stored renewable energy a viable option for managing peak power demand.
• The VGF shall be disbursed in five tranches linked with the various stages of implementation of BESS projects.
• To ensure that the benefits of the scheme reach the consumers, a minimum of 85 percent of the BESS project capacity will be made available to distribution companies or discoms.

In its announcement, the government said this would not only improve the integration of renewable energy into the grid, but also "minimize wastage while optimizing the utilization of transmission networks", thereby reducing the need for costly infrastructure upgrades. India has seen the announcement of more than 29 GWh of energy storage system (ESS) projects, and authorities have tendered projects totaling as much as 5 GWh.

Last week, the country's Union power ministry notified a national framework for promoting energy storage.

The report stated that "Storage of energy will help in bringing down the variability of generation in RE sources, improving grid stability, enabling energy/ peak shifting, providing ancillary support services and enabling larger renewable energy integration. Storage Systems will also benefit consumers by bringing down peak deficits, peak tariffs, reduction of carbon emissions, deferral of transmission and distribution capex, and energy arbitrage."