Why in news?
The Union Cabinet approved a Viability Gap Funding (VGF) scheme for grid-scale energy storage on 4 November 2026. It provides financial support of ₹14,500 crore over 2026–27 to 2030–31 for projects planned to add 92 gigawatt-hours (GWh) of storage. Large storage systems absorb electricity when it is available and supply it later. This helps the grid use variable solar and wind generation while meeting demand at different times.
Why the grid needs storage
An electricity grid connects generators, transmission lines, distribution networks and consumers. Supply and demand must remain closely balanced as they change. Solar output follows daylight and weather, while wind output varies with wind conditions. Demand also changes through the day, so the periods of high renewable generation and high consumption can differ.
Storage helps bridge that timing gap. For example, a battery can charge using solar electricity during the day and discharge during an evening demand peak. Storage can also respond to shorter fluctuations and support grid stability. Its usefulness depends on both how much energy it holds and how quickly it can deliver that energy.
Power, energy and duration
Power is the rate at which energy is delivered. It is measured in watts and larger units such as megawatts (MW) and gigawatts (GW). Energy measures the amount delivered over time. One gigawatt-hour is the energy supplied by one gigawatt operating for one hour.
As a simple illustration, a fully charged system with 4 GWh of usable energy could supply 1 GW for four hours. This assumes a steady output and uses the energy available for discharge. The scheme’s 92 GWh describes planned energy-storage capacity. A separate power rating is needed to work out how quickly any particular project can discharge.
Two ways to store energy
A Battery Energy Storage System (BESS) stores energy through electrochemical processes. Charging changes the chemical state of the battery; discharging converts stored chemical energy into electrical energy. Power-conversion equipment connects the batteries to the grid and controls the exchange of electricity.
A Pumped Storage Project (PSP) uses water reservoirs at different heights. Electricity drives pumps that move water into the upper reservoir. The raised water stores gravitational potential energy. When electricity is needed, water flows downhill through a turbine linked to a generator. The water reaches the lower reservoir and can be pumped uphill again.
Some energy is lost during charging, storage and discharge. Round-trip efficiency measures the share of charging energy recovered as useful electrical output. This affects how much electricity a project must buy to provide its later supply. Project economics also depend on construction costs, operating costs and the value of electricity at different times.
What the new scheme supports
The planned 92 GWh comprises 60 GWh of pumped storage, 30 GWh of battery storage and 2 GWh of alternative storage technologies. The Cabinet announcement estimates total project investment at ₹97,600 crore. The ₹14,500-crore public-support package is intended to help make those projects financially viable.
Viability gap funding provides financial assistance where an infrastructure project’s expected revenues leave a financing gap. Under this scheme, storage capacity will be allocated through tariff-based competitive bidding. Eligible public and private electricity distribution companies can receive support for battery and pumped-storage projects. Public and private entities can implement the alternative-technology projects.
Battery projects will carry a minimum 40% Domestic Content Requirement (DCR). This condition is intended to encourage Indian manufacturing and reduce reliance on imported components. It connects demand for storage projects with the scheme’s industrial-policy objective.
Conclusion
Grid storage links the time electricity is generated with the time it is needed. The approved scheme combines project finance with support for several storage technologies. Its capacity mix brings together batteries and pumped water, whose different physical processes serve the shared task of supplying stored energy to the grid.
Sources
- Cabinet: storage VGF approval, capacity mix and domestic-content requirement, 4 November 2026
- Department of Economic Affairs: the general purpose of viability gap funding
- US Energy Information Administration: storage systems, power and energy capacity
- US Energy Information Administration: units of electrical power and energy
- US Department of Energy: pumped-storage hydropower
- US Energy Information Administration: round-trip efficiency