Context: The Indian government has finalized a mechanism to fund the development of 4,000 MWh of battery energy storage systems (BESS) in the country.

Battery Energy Storage System (BESS)

• About: BESS is a technology developed for storing electric charge by using specially developed batteries
• Aim: To develop 4,000 MWh of projects by 2030-31, with up to 40% VGF (Viability Gap Funding) of the capital cost.
• Financial Overview: The scheme's initial outlay is ₹9,400 crore, with a budgetary support of ₹3,760 crore.
• Objectives: The scheme targets a levelised cost of storage ranging from ₹5.50-₹6.60 per kilowatt-hour, making stored Renewable Energy (RE) a feasible option for managing peak power demand.
• VGF Disbursement and Approval Process: VGF will be disbursed in five tranches, and projects will be approved within three years starting FY24.
• Consumer Benefit: A minimum of 85% of project capacity will be allocated to distribution companies (discoms) to ensure consumer benefits.
• Infrastructure Impact: The BESS scheme is anticipated to reduce the necessity for expensive infrastructure upgrades.
• Addressing Intermittency Issues: Despite increased renewable energy capacity, intermittency issues limit actual RE generation to 25% of total electricity generation.
• Net-Zero Targets: Achieving net-zero targets by 2070 necessitates cost-effective storage solutions for renewable energy.

Operational Framework

• Government's Initiative: The government is promoting BESS to meet rising power demands and energy transition goals.
• Electricity Delivery and Grid Stability: BESS projects will supply electricity during peak demand periods while stabilizing the grid.
• Charging from Renewable Sources: Charging of BESS will primarily occur during periods of surplus renewable energy generation.