India is set to offer incentives totaling 37.6 billion rupees ($455.2 million) to companies embarking on battery storage projects, with a combined capacity of 4,000 megawatt hours (MWh), according to government sources familiar with the matter. The scheme, which was revealed recently, aims to support battery storage initiatives that are crucial to India's ambitious plan of expanding its renewable energy capacity to 500 gigawatts (GW) by 2030. Additionally, it seeks to reduce the current cost of battery energy storage, which ranges between 5.5 and 6.5 rupees per unit.
Battery storage technology plays a vital role in stabilizing the power grid by backing up intermittent renewable energy sources. However, large-scale operational projects in this domain remain relatively scarce worldwide. The newly introduced scheme aims to foster the development of large-scale battery energy storage systems through competitive bidding processes, thereby driving down costs.
To mitigate the risks associated with economically unviable infrastructure projects, the government plans to provide viability gap funding in the form of grants for a duration of three years. It is also anticipating private investments worth 56 billion rupees to flow into the sector as a result of this initiative.
The contracts for battery storage projects will be disbursed in five tranches until the fiscal year 2030-31, according to one of the government sources, who spoke on the condition of anonymity due to the proposal not yet being public and requiring federal cabinet approval. The selection of companies to undertake the projects will be conducted through a competitive process, with the contract awarded to the bidder offering the lowest bid.
India's Power Secretary, Alok Kumar, emphasized the country's commitment to transitioning its energy sources while ensuring energy security for its population. He described the battery energy storage scheme as a significant step in this direction, noting that such systems are vital in facilitating the energy transition.
Several Indian conglomerates, including Reliance Industries, Adani Power, and JSW Energy, have already expressed their intent to establish large-scale battery plants. The proposal for the incentives was initially announced by Finance Minister Nirmala Sitharaman during her budget speech on February 1. The final decision on the scheme's approval lies with the country's cabinet, led by Prime Minister Narendra Modi, although no specific timeline has been provided for this process.
As of now, India possesses a total battery storage capacity of 37 MWh. However, estimates from the country's power sector planning body suggest that an additional 236 gigawatt hours (GWh) of battery energy storage will be required by 2031-32, along with 27 GW of pump storage projects, to meet the nation's energy demands.