Cabinet Clears ₹14,500 Crore Viability Gap Funding for 92 GWh of Grid Energy Storage
The Union Cabinet approved a Viability Gap Funding (VGF) scheme of ₹14,500 crore to build 92 GWh (gigawatt-hours) of grid-scale energy storage. A gigawatt-hour is a measure of how much electricity can be stored and supplied.
The 92 GWh is split across three technologies: 60 GWh from Pumped Storage Projects (PSP), 30 GWh from Battery Energy Storage Systems (BESS) and 2 GWh from emerging (newer) storage technologies.
The scheme runs for five financial years, from 2026-27 to 2030-31. The total investment it is expected to bring in is about ₹97,600 crore.
Storage capacity will be given out through tariff-based competitive bidding: the developer who offers the lowest price for the storage service wins.
Public and private electricity distribution companies (discoms) can get VGF for battery and pumped storage projects. Projects using other storage technologies can be run by public or private bodies.
Battery projects must meet a minimum Domestic Content Requirement (DCR) of 40%, meaning at least 40% of the value must be made in India. The goal is to store surplus solar and wind power and supply it at night or at peak hours, for round-the-clock clean power.
Viability Gap Funding (VGF): How the Government Makes Infrastructure Projects Bankable
Viability Gap Funding, or VGF, is a one-time grant that the government gives to a project that is useful for the country but cannot earn enough money on its own to attract private investors. The "viability gap" is the shortfall between what the project costs and what it can earn. The government fills this gap with public money, so that a private company is willing to build and run the project. It is mostly used in Public-Private Partnership (PPP) projects such as roads, water supply, hospitals, air routes and clean energy.
The ₹14,500 crore storage scheme uses the VGF tool to close the cost gap of building batteries and pumped storage plants. Storage is costly to build, but it lets solar and wind power be used at night. By paying part of the cost and choosing developers through tariff-based bidding, the government hopes to bring in about ₹97,600 crore of total investment for 92 GWh of storage.
Battery Energy Storage Systems (BESS)
A Battery Energy Storage System (BESS) is a very large set of rechargeable batteries connected to the power grid. It stores electricity when there is extra supply, for example from solar panels at noon, and gives it back when demand is high or supply falls, for example in the evening. You can think of it as a giant power bank for the whole grid. Most grid batteries today use lithium-ion cells.
BESS is one of the three technologies funded under the new scheme. The 40% domestic content rule links the scheme to India's push to make batteries at home, alongside the existing battery manufacturing incentives.
Pumped Storage Hydropower
Pumped storage hydropower stores electricity using water and two reservoirs at different heights. When there is extra electricity, pumps push water up to the upper reservoir. When power is needed, the water flows back down through turbines and makes electricity. It works like a giant, rechargeable water battery that can run for many hours.
By giving pumped storage the biggest share of the target, the scheme relies on this mature, long-lasting technology to shift large amounts of solar power from the day to the night and to peak hours.
- Scheme outlay: ₹14,500 crore (Viability Gap Funding)
- Total storage target: 92 GWh by 2030-31
- Split: 60 GWh Pumped Storage Projects, 30 GWh BESS, 2 GWh emerging technologies
- Period: FY 2026-27 to FY 2030-31
- Expected total investment: about ₹97,600 crore
- Allocation: tariff-based competitive bidding
- Eligible for VGF (BESS and PSP): public and private discoms
- BESS Domestic Content Requirement: minimum 40%
- India's estimated grid-scale storage need: 411 GWh by 2031-32
- India's renewable energy target: 500 GW of non-fossil capacity by 2030