VGF SCHEME FOR BATTERY STORAGE (Syllabus: GS Paper 3 – Economy)

News-CRUX-10     25th December 2023        
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Context: Recently, the Union Minister for Power, New & Renewable Energy has informed that the Government has approved the scheme for Viability Gap Funding (VGF) for development of Battery Energy Storage Systems (BESS) with capacity of 4,000 megawatts hours (MWh).

VGF Scheme for Battery Storage

  • About: VGF stands for Viability Gap Funding, which aims at supporting infrastructure projects that are economically justified but fall marginally short of financial viability.
  • Initiated: In 2004, supports projects falling under Public-Private Partnerships (PPP).

oThis scheme operates as a Plan Scheme, with budget allocations made on an annual basis by the Ministry of Finance.

  • Aim: VGF grants are given as capital subsidies to encourage private sector involvement in financially unviable PPP projects.

oThese projects often lack commercial viability due to extended gestation periods and limited future revenue prospects.

  • Benefits of VGF

oVGF grants for Battery Energy Storage System (BESS) developers are awarded through a competitive bidding process.

oIt supports a production-linked incentive program that encourages domestic manufacturing, driving technology innovation.

oVGF serves a crucial role in covering the development costs for battery manufacturers during technology development phases.

Battery Energy Storage Systems (BESS)

  • About: BESS is a technology developed for storing electric charge by using specially developed batteries.
  • They enable energy from renewables like solar and wind to be stored and released on demand later.