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India’s ministry of Power issues viability gap funding guidelines for battery storage

The Ministry of Power (MoP) has recently rolled out operational guidelines for a significant programme valued at Rs 94 billion

By Ground report 26 Mar 2024

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India’s Ministry issues viability gap funding guidelines for battery storage

The Ministry of Power (MoP) has recently rolled out operational guidelines for a significant programme valued at Rs 94 billion designed to bolster the development of Battery Energy Storage Systems (BESS) across India. The initiative, which is set to run from 2023-24 to 2025-26, aims to establish 4,000 MWh of BESS capacity with a budgetary provision of Rs 37.6 billion.

Under the program, projects are required to be operational within 24 months following the agreement signing. Funding will be released in five tranches, linked to the achievement of specific milestones, including financial closure and the start of commercial operations. The allocation of projects will be determined through a tariff-based competitive bidding process, with developers vying for the lowest annualized fixed costs under set tariff limits.

A significant aspect of the initiative is the mandatory participation of the private sector, with a cap on the capacity that a single developer can be awarded. A developer may acquire up to 50% of the total capacity in a given round but is limited to a cumulative capacity of 1,000 MWh across all rounds. Projects must have at least 100 MWh capacity to qualify.

The project contracts, spanning from 10 to 12 years, will be granted under the build, own, and operate model. The National Load Dispatch Center (NLDC) will play a pivotal role in determining the grid's stress hours, usually during morning and evening peak periods, with advance notices provided to stakeholders.

Battery implementation agencies (BIAs) will be responsible for sourcing electricity from renewable sources and market purchases to charge storage devices. The stored energy will then be utilized for grid management activities, power exchanges, bilateral contracts, and auxiliary services, with a fixed trading margin set at Rs 0.04 per kWh of energy sold.

Furthermore, mechanisms such as the BESS balancing pool (BBP) overseen by a central agency will handle revenue discrepancies from BESS operations, ensuring long-term viability and payment assurance for developers. The central transmission utility of India will oversee the monitoring of projects under this programme to ensure adherence to guidelines and operational efficiency.