India to offer $455 million in incentives for battery storage projects

India will offer 37.6 billion rupees ($455.2 million) in incentives to companies setting up battery storage projects totaling 4,000 megawatt hours (MWh) under a scheme announced earlier this year, two government sources said.

The scheme is intended to boost battery storage projects critical to India's ambitious plan to expand its renewable energy capacity to 500 gigawatts (GW) by 2030 and cut the cost of battery energy storage from the current 5.5-6.5 rupees per unit.

Battery storage, used to back up intermittent renewable power supply to stabilise the grid, is an evolving technology, and there are very few large-scale operational projects in the world.

The scheme intends to develop large-scale battery energy storage systems to bring down costs through competitive bidding.

The government will provide so-called viability gap funding - incentives to cover risks of developers of critical infrastructure projects that are or may turn out to be economically unviable - in the form of grants for three years, the sources said. It also expects private investments worth 56 billion rupees through the scheme.

The disbursement of the contracts will be made in five tranches until 2030-31, one of the sources said, requesting anonymity since the proposal is not yet public and needs federal cabinet approval.

Contracts will be awarded through a competitive process, with the company with lowest bid selected, they said.

India's power ministry did not respond to a request for comment. A number of Indian conglomerates including Reliance Industries, Adani Power and JSW Energy have plans to set up large-scale battery plants.

The proposal, announced by Finance Minister Nirmala Sitharaman in her budget speech on Feb. 1, will next be taken up for decision by the country's cabinet headed by Prime Minister Narendra Modi.

No timeline for the approval has yet been given. India has 37 MWh of battery storage capacity currently.

According to estimates from its power sector planning body, it requires 236 gigawatt hours (GWh) of battery energy storage in addition to 27 GW pump storage projects by 2031-32. ($1 = 82.6100 Indian rupees)

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