Viability gap funding to promote battery energy storage system

Recently, the Union Cabinet approved Rs.3, 760 crore in viability gap funding for establishing a battery energy storage system in India.

• The entire amount for viability gap funding will be borne by the central government.
• The fund will be released in five tranches till 2030-31 and help in creation of 4,000 MW hours storage.
• The viability gap funding will lead to an investment of Rs.9, 500 crore.
• Objective: India aims to meet its 50 per cent of energy requirements through renewable energy and non-fossil energy sources.

What is Viability Gap Funding?

• The Viability Gap Funding (VGF) Scheme aims at supporting infrastructure projects that are economically justified but fall marginally short of financial viability.
• Support under this scheme is available only for infrastructure projects where private sector sponsors are selected through a process of competitive bidding.
• The total VGF under the scheme does not exceed 20% of the total project cost; however, the Government may decide to provide additional grants up to a limit of a further 20%.

What is the process of getting VGF?

The process for availing viability gap funding (VGF) involves:

• Submission of project proposals that include requisite information by the Government/ statutory entity owning the underlying asset Projects based-on model documents would be preferred over standalone documents Empowered Institution (EI) may seek required details for satisfying eligibility criteria.
• The EI shall inform the sponsoring Government/ statutory entity whether the project is eligible for financial assistance within 30 to 60 days.
• The EI may refer the case to Empowered Committee (EC) for further clarity on eligibility Projects shall be approved and implemented in accordance with the procedures specified from time to time.
• The inter-se allocation of VGF between an ongoing scheme and this scheme shall be determined by the

Battery Energy Storage System (BESS) Project

• This is the joint effort of both the Ministry of New and Renewable energy and the Ministry of Power who have been working on this to provide a road map for the installation of the energy storage system in the country.
• Objective:
  • In order to support the ambitious goal of achieving 450 GW renewable energy target of the Ministry of New and renewable energy by 2030, it is important that it gets duly supported with installation of energy storage systems (battery energy storage system, hydro pump storage plants etc.).
• Battery Energy Storage System (BESS) is a technology developed for storing electric charge by using specially developed batteries.
• The underlying idea being that such stored energy can be utilized at a later time.
• Enormous amount of research has led to battery advances that have shaped the concept of Battery Energy Storage System into a commercial reality.
• Battery Energy Storage Systems (BESSs) are a sub-set of Energy Storage Systems (ESSs).
• Energy Storage System is a general term for the ability of a system to store energy using thermal, electro-mechanical or electro-chemical solutions.
• A BESS typically utilizes an electro-chemical solution.
• Essentially, all Energy Storage Systems capture energy and store it for use at a later time or date.
• Examples of these systems include pumped hydro, compressed air storage, mechanical flywheels, and now BESSs.
• These systems complement intermittent sources of energy such as wind, tidal and solar power in an attempt to balance energy production and consumption.

Why battery storage system is beneficial?

• Decreasing Cost: A major factor in the rapid increase in the use of BESS technology has been a 50% decrease in costs of energy storage over the last two years.
• Security of supply: Storage technologies are also popular because they improve energy security by optimizing energy supply and demand, reducing the need to import electricity via inter-connectors, and also reducing the need to continuously adjust generation unit output.
• Financial Incentive: Many governments and utility regulators are actively encouraging the development of battery storage systems with financial incentives, which is likely to lead to further growth.

Concerns associated:

• Risk involved in using BESS: While the use of batteries is nothing new, what is new is the size, complexity, energy density of the systems and the Li-ion battery chemistry involved — which can lead to significant fire risks.
• Difficulty of fighting battery fires: Battery fires are often very intense and difficult to control. They can take days or even weeks to extinguish properly, and may seem fully extinguished when they are not.
• Failure of control systems: Another issue can be failure of protection and control systems. For example, a Battery Management System (BMS) failure can lead to overcharging and an inability to monitor the operating environment, such as temperature or cell voltage.