Cabinet Approves ₹14,500 Crore Funding Scheme for 92 GWh of Grid Storage

Synopsis

The Union Cabinet on November 4 gave in to a demand for viability gap funding for 92 gigawatt-hours (GWh) of grid-scale energy storage from 2026-27 to 2030-31 at a cost of ₹14,500 crore. The capacity includes 60 GWh of pumped storage, 30 GWh of batteries and 2 GWh of emerging technologies, with estimated investments of ₹97,600 crore. Storage should be used to store extra power generated by solar and wind energy when production decreases.

What was approved

The Union Cabinet headed by Prime Minister Narendra Modi approved a Viability Gap Funding (VGF) scheme of a total support of ₹14,500 crore for the next three years (2026-27 to 2030-31). The scheme aims to provide 92GWh of energy storage capacity which has yet to be brought online. An investment of estimated ₹97,600 crore is expected to come through the projects.

The capacity is divided into 60 GWh hydro pumped storage, 30 GWh battery energy storage and 2 GWh emerging storage. This means that about two-thirds of the target is met by pumped storage.

Support is available for battery projects and pumped-storage projects for public and private power distribution companies. According to one report, the projects for batteries will come with a 40% domestic content requirement, which should be verified against the official notification.

The importance of energy storage in India's renewable transition

The output of solar and wind power is unpredictable and dependent on the weather and time of day. Surplus electricity can be stored in a storage system and used when demand peaks or generation is low.

Union Minister Ashwini Vaishnaw has explained in simple terms what pumped storage is all about: Solar power is utilized to pump the water to high elevations and water in high elevation subsequently powers the turbines. The funding scheme is supposed to enhance grid stability and minimise curtailment, which is the loss of renewables when the grid demands more electricity than it can produce.

The policy setting

The government has 500 GW of renewable energy as a goal by 2030. The limiting factor for the use of variable power in the grid is storage. The new VGF support is said to complement the existing support provided to battery manufacturing on the supply side. A viability gap grant (VGG) funds a project's capital cost that is not bankable due to revenues alone.

Implementation questions

Pumped Storage is a long process of construction and requires land, water and environmental clearance. The cost, cell supply and domestic content are different tests for battery projects. Distribution companies' speed in signing contracts, and the tariff terms of stored power will determine the delivery against the FY31 target.

The penetration of the scheme into current installed storage is on the large side, but benefits are subject to construction schedules. The first awards to tenders will tell if the 92 GWh target can be achieved.