**Executive Summary**
The Ministry of Power has announced measures to reduce the cost of Battery Energy Storage Systems (BESS), including VGF schemes and ISTS charges waiver. The cost of BESS discovered through competitive bidding has reduced to ₹2.1/kWh. Another VGF scheme for 30 GWh of BESS capacity will be launched in June 2025.
**Key Points / Main Content**
* **Cost Reduction of BESS:**
* Cost of BESS discovered through competitive bidding in 2022-23 was ₹10.18/kWh for 2 cycles daily.
* The cost of BESS has reduced to ₹2.1/kWh without VGF for 2 cycles daily.
* BESS utilization is expected at 1.5 cycles per day, corresponding to a storage cost of ₹2.8/kWh.
* The average rate of electricity from solar projects is in the range of ₹2.5/kWh.
* **VGF Scheme by Ministry of Power:**
* Administering a VGF Scheme for setting up 13,220 MWh of BESS capacity with ₹3,760 Cr budgetary support.
* Another VGF scheme launched in June 2025 for the development of 30 GWh of BESS capacity with ₹5,400Cr financial support through Power System Development Fund (PSDF).
* **ISTS Charges Waiver:**
* Waiver of Inter-State Transmission System (ISTS) charges for 12 years for co-located BESS projects commissioned by June 2028.
* ISTS charges waiver is granted for non-co-located BESS projects commissioned before June 2025; thereafter, the waiver will be reduced annually by 25%.
* **Production Linked Incentive (PLI) Scheme:**
* The Ministry of Heavy Industries is implementing the PLI scheme "National Programme on Advanced Chemistry Cell (ACC) Battery Storage".
* Aims to establish 50 GWh of domestic Advanced Chemistry Cell manufacturing capacity.
* 10 GWh is earmarked for Grid Scale Stationary Storage (GSSS) applications.
* Approved in May 2021 with a total outlay of ₹18,100 crore.
* Encourages domestic manufacturing of cells for grid-scale applications, reduces import dependency, and lowers BESS costs.
**Impact Analysis**
**Battery Energy Storage System (BESS) Project Developers**
* **Impact:**
* Reduced project costs due to lower BESS prices and ISTS charge waivers.
* Increased financial viability through VGF schemes.
* **Action Required:**
* Evaluate and apply for VGF schemes to enhance project economics.
* Ensure BESS projects meet the commissioning deadlines for ISTS charge waivers.
**Domestic Battery Manufacturers**
* **Impact:**
* Increased demand due to PLI scheme incentives for domestic manufacturing.
* Enhanced competitiveness against imports.
* **Action Required:**
* Leverage the PLI scheme to invest in and expand ACC manufacturing capacity.
**Grid Operators and Utilities**
* **Impact:**
* Greater integration of renewable energy sources due to affordable battery storage.
* Improved grid stability and reliability.
* **Action Required:**
* Plan for increased deployment of BESS and integrate it into grid management strategies.
**Consumers**
* **Impact:**
* Potential reduction in electricity costs due to lower storage expenses.
* **Action Required:**
* None stated in the document.
Key Entities Referenced
VGF Scheme: A Viability Gap Funding scheme administered by the Ministry of Power to support the establishment of Battery Energy Storage System (BESS) capacity.
ISTS Charges Waiver: Waiver of Inter-State Transmission System charges for co-located and non-co-located BESS projects to incentivize their deployment.
Production Linked Incentive (PLI) scheme: National Programme on Advanced Chemistry Cell (ACC) Battery Storage: A PLI scheme implemented by the Ministry of Heavy Industries to encourage domestic manufacturing of advanced chemistry cells for battery storage.
Ministry of Power: The primary ministry administering the VGF Scheme for Battery Energy Storage Systems (BESS).
Power System Development Fund (PSDF): A fund providing financial support for BESS capacity development under the VGF scheme.
Ministry of Power
Per kWh Cost of Battery Energy Storage System
Falls Steeply
VGF Schemes, ISTS Charges Waiver Boosts Affordable
Battery Storage
प्रव तथ: 15 DEC 2025 4:22PM by PIB Delhi
The cost of Battery Energy Storage System (BESS) discovered through tariff based competitive bidding
during 2022-23 was about ₹ 10.18 / kWh, if the storage is used for 2 cycles daily. The cost of BESS
discovered through competitive bidding in the recent past has substantially reduced to about ₹ 2.1 / kWh
without VGF, if the storage is used for 2 cycles daily. However, based on the market trend, it is expected
that BESS will be utilised for 1.5 cycles per day which corresponds to storage cost of ₹ 2.8 / kWh. Based
on the recent tenders, average rate of electricity from solar projects is in the range of ₹ 2.5 / kWh.
In order to make battery storage affordable, the Ministry of Power is administering a VGF Scheme for
setting up 13,220 MWh of BESS capacity with budgetary support of ₹3,760 Cr. Additionally, Ministry of
Power, in June, 2025, has launched another VGF scheme for development of 30 GWh of BESS capacity,
with a financial support of 5,400Cr, through Power System Development Fund (PSDF).
Also, waiver of Inter-State Transmission System (ISTS) charges is provided for 12 years for co-located BESS projects to be
commissioned by June 2028. For non-co-located BESS projects, ISTS charges waiver is granted for projects which will be
commissioned before June 2025 and thereafter, waiver will be reduced annually in graded steps of 25%.
Ministry of Heavy Industries is implementing the Production Linked Incentive (PLI) scheme namely
“National Programme on Advanced Chemistry Cell (ACC) Battery Storage”, to establish 50 GWh of
domestic Advanced Chemistry Cell manufacturing capacity, out of which 10 GWh is earmarked for Grid
Scale Stationary Storage (GSSS) applications. The scheme was approved in May 2021 with a total outlay
of ₹18,100 crore.
The PLI scheme would encourage investment in the domestic manufacturing of cells for grid-scale
applications, reduce dependency on imports and eventually reduce the cost of BESS in future.
This information was given by the Minister of State for Power, Shri Shripad Yesso Naik, in a written reply
in the Rajya Sabha today.
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