VGF, PLI Schemes Accelerate Decline In Battery Energy Storage Costs: Power Ministry

New Delhi, Dec 16 (KNN) The cost of Battery Energy Storage Systems (BESS) discovered through tariff-based competitive bidding has declined sharply in recent years, reflecting improving market dynamics and technological maturity, the government informed Parliament.

Steep Decline in Battery Storage Costs

Minister of State for Power Shripad Naik said that during 2022-23, the cost of BESS was around Rs 10.18 per kWh when used for two cycles daily. 

Recently, through competitive bids, costs have fallen significantly to about Rs 2.1 per kWh without viability gap funding (VGF) for two daily cycles. 

Based on market trends, BESS is expected to be utilised for about 1.5 cycles per day, translating to storage cost of Rs 2.8 per kWh. The average tariff discovered in recent solar power tenders is in the range of Rs 2.5 per kWh.

VGF Schemes to Make Storage Affordable

To improve affordability of battery storage, the Ministry of Power is implementing a VGF scheme to set up 13,220 MWh of BESS capacity with budgetary support of Rs 3,760 crore. 

In addition, a new VGF scheme was launched in June 2025 for development of 30 GWh of BESS capacity, with financial support of Rs 5,400 crore through the Power System Development Fund (PSDF).

The government has also provided a waiver of Inter-State Transmission System (ISTS) charges for co-located BESS projects for 12 years, provided they are commissioned by June 2028. 

For non-co-located projects, ISTS charge waivers apply to projects commissioned before June 2025, after which the waiver will be reduced annually in graded steps of 25 per cent.

PLI Scheme to Strengthen Domestic Battery Manufacturing

The Ministry of Heavy Industries is implementing the Production Linked Incentive scheme for Advanced Chemistry Cell (ACC) battery storage. 

The scheme aims to establish 50 GWh of domestic ACC manufacturing capacity, with 10 GWh earmarked for grid-scale stationary storage applications. 

Approved in May 2021, the scheme has a total outlay of Rs 18,100 crore and is expected to encourage investment in domestic manufacturing of battery cells for grid-scale use.

(KNN Bureau)