The Union Cabinet has approved a Rs 14,500-crore Viability Gap Funding (VGF) scheme for the development of grid-scale energy storage systems from 2026-27 to 2030-31.

According to the government, the scheme is aimed at supporting the development of 92 gwh of fresh, yet-to-be-commissioned, energy storage capacity across the country.

“The scheme will support creation of new capacities equivalent to 170 per cent of the present-day grid-scale energy storage system (ESS) capacity in the country and help meet the required grid-scale ESS capacity of 411 gwh by 2031-32,” the government has said in a release.

The scheme is designed to facilitate the development of 60 gwh of hydro-pumped storage plant (PSP) capacity, 30 gwh of battery energy storage system (BESS) capacity and 2 gwh of capacity through alternative energy storage technologies with a total estimated investment of Rs 97,600 crore.

“The VGF support will help improve the financial viability of these projects and accelerate the deployment of large-scale energy storage infrastructure in the country,” the government has said.

The scheme will also provide an impetus to domestic manufacturing of BESS.

Energy storage capacity will be allocated through a tariff-based competitive bidding process, with both public and private sector electricity distribution companies eligible for VGF support for BESS and hydro-PSP projects.