India’s Grid-Scale Energy Storage Scheme: Building Reliable Renewable Power

New storage support scheme: The Cabinet approved a central Viability Gap Funding (VGF) scheme for grid-scale energy storage systems. VGF is a capital grant that reduces the initial cost of projects that are socially or economically useful but are not yet commercially viable at affordable tariffs.

Technology mix: The programme covers battery energy storage systems, hydro pumped storage projects and a smaller technology-neutral window for emerging storage solutions. It is designed to create new, yet-to-be-commissioned capacity rather than subsidise already operating projects.

Official figure: The Cabinet’s official release specifies ₹14,500 crore as the total financial support. This official figure is used here because it supersedes the higher amount reported in the supplied clipping’s headline.

Basic idea: An energy storage system takes electricity from the grid, converts it into another form of energy, stores it and later converts it back into electricity. At grid scale, the system is large enough to support electricity generation, transmission or distribution rather than only one household or device.

Power and energy: GW measures power, or the maximum rate at which a system can charge or discharge. GWh measures energy, or the total electricity it can store and deliver over time. For example, a 1 GW system storing 4 GWh can, in a simplified case, discharge at full power for about four hours.

Not a source of primary energy: Storage does not generate new electricity. It shifts electricity from a time of abundance or low demand to a time of scarcity or high demand, with some energy lost during charging and discharging.

Electrochemical storage: A BESS generally contains battery cells assembled into modules and racks, a battery-management system, thermal and fire-safety systems, and power-conversion equipment. It charges by converting electrical energy into chemical energy and discharges by reversing the process.

Fast response: Batteries can change output very quickly. This makes them useful for frequency control, voltage support, short-duration peak supply, renewable-energy smoothing and congestion management.

Technology choice: Lithium-ion batteries, especially lithium iron phosphate chemistry, are widely used because of falling costs, high efficiency and fast response. Other options include sodium-ion, flow batteries and different long-duration technologies. Their suitability depends on cost, discharge duration, safety, climate, land and the intended grid service.

Gravitational storage: A pumped storage project uses surplus electricity to pump water from a lower reservoir to a higher reservoir. When electricity is needed, water flows downhill through turbines and generates power.

Longer life and duration: Pumped storage can provide large capacity, longer discharge periods and a long operating life. It is therefore suitable for daily peak shifting and bulk power balancing.

Site dependence: Unlike modular batteries, pumped storage requires suitable terrain, reservoirs, water management, transmission access and longer construction periods. Projects can also create land, ecological and community impacts, so environmental appraisal and cumulative-impact assessment remain important.

Variability of renewables: Solar output falls after sunset and wind output changes with weather. Electricity demand, however, continues throughout the day. Storage can absorb excess generation and release it during evening peaks or low-renewable periods.

Grid services: Storage can provide frequency regulation, voltage support, peak shifting and balancing reserves. It can also reduce renewable-energy curtailment, defer some network expansion and improve restoration capability after disturbances.

Firm renewable power: By combining renewable generation with storage, utilities can procure more predictable and dispatchable electricity. This supports round-the-clock renewable supply without treating every temporary imbalance as a need for new fossil-fuel capacity.

Energy security: A more flexible grid can use a larger share of domestic renewable resources. At the same time, battery mineral and cell imports can create a new dependence unless India diversifies supply chains, develops domestic value addition and expands recycling.

Competitive allocation: Capacity is to be allocated through tariff-based competitive bidding. Bidders compete on the tariff or support requirement, helping reveal costs and limiting arbitrary allocation.

Eligible entities: Public and private electricity distribution companies can receive support for BESS and pumped storage procurement. Alternative storage projects can be implemented by public or private entities.

Domestic manufacturing: BESS projects under the scheme must meet a 40% domestic content requirement. This demand-side condition is intended to support Indian manufacturing and complement supply-side incentives for advanced battery cells.

Public-finance logic: VGF lowers the capital-cost burden, but the project must still have a sound revenue model through capacity payments, energy arbitrage or grid services. Competitive procurement, payment security and enforceable performance standards are therefore essential.

Legal recognition: The Electricity (Amendment) Rules, 2022 recognise energy storage as part of the power system. Storage may operate independently or alongside generation, transmission or distribution, and its regulatory status depends on its use.

National planning: The Ministry of Power’s National Framework for Promoting Energy Storage Systems seeks round-the-clock renewable power, technology-neutral procurement, domestic manufacturing, safety standards, recycling and resource-adequacy planning.

Market participation: The Central Electricity Regulatory Commission’s Ancillary Services Regulations allow eligible storage resources to provide secondary and tertiary reserves. Storage can therefore earn value not only from buying and selling electricity at different times but also from stabilising the grid.

Earlier support: The government had already introduced BESS VGF programmes and policy measures such as procurement guidelines, infrastructure status and transmission-charge concessions. The new scheme expands the scale and includes pumped and emerging storage technologies.

Closing the storage gap: The Central Electricity Authority’s National Electricity Plan projects a very large rise in storage needs as solar and wind capacity expand. The new programme addresses part of this requirement and creates a clearer project pipeline for developers, utilities and manufacturers.

System resilience: A diversified portfolio of batteries, pumped storage and emerging technologies reduces dependence on a single storage chemistry or duration. Short-duration and long-duration resources can serve different grid needs.

Industrial opportunity: Stable demand can encourage domestic battery packs, power electronics, control systems, engineering services and eventually cell manufacturing. However, a domestic-content percentage should measure meaningful value addition rather than simple final assembly.

Commercial viability: Storage earns revenue from several services, but market rules may not pay for all of them. Uncertain revenue, high financing costs and financially weak distribution companies can delay projects even after capital support.

Safety and degradation: Batteries lose usable capacity over repeated cycles and can face thermal-runaway or fire risks if design, cooling, monitoring and emergency response are weak. Standards must cover cells, containers, siting, operation and end-of-life handling.

Supply chains and waste: Lithium, nickel, graphite, cathode materials and cells are concentrated in a few global supply chains. Mining impacts and battery waste require traceability, recycling and extended producer responsibility.

Environmental and social impacts: Pumped storage can affect forests, rivers, groundwater, landscapes and local livelihoods. Closed-loop or off-river projects may reduce some impacts but do not remove the need for environmental clearance, dam safety, water budgeting and community consultation.

Planning mismatch: Storage without adequate transmission, forecasting, dispatch reform and time-of-day tariffs may be underused. Capacity additions must therefore be coordinated with renewable parks, grid expansion and state resource-adequacy plans.

Flexibility is infrastructure: Adding renewable megawatts is not enough. A reliable low-carbon power system also requires storage, transmission, demand response, forecasting, flexible generation and efficient electricity markets.

Technology neutrality with safeguards: Public policy should procure a required service—such as four-hour peak supply or fast frequency response—rather than permanently favour one technology. Safety, lifecycle emissions, water use, land impact and recycling must be included in project evaluation.

Just transition in the power system: Storage can reduce curtailment and fossil balancing, but affordability and distribution-company finances remain central. The success of the scheme will be judged by reliable power delivered at reasonable system cost, not merely by sanctioned capacity.