No plans to offer viability gap funding for pumped storage projects, Indian government announces

The government’s decision aligns with its strategic outlook on financial allocations, emphasising the self-sufficiency of certain technologies.

Union Minister for Power, New and Renewable Energy, RK Singh, has informed the Parliament that, at present, the Indian government does not have any plans to provide Viability Gap Funding (VGF) for pumped storage projects. Singh elucidated the rationale behind this decision, citing the economically viable nature of the levelised cost of storage for pumped storage projects.

This declaration assumes significance against the backdrop of a segment of industry stakeholders advocating for VGF in the realm of pumped storage projects. This plea emerged subsequent to the Union Cabinet’s endorsement, on September 6, of the Ministry of Power’s proposal to extend a VGF of ₹3,760 crore for the establishment of battery energy storage systems (BESS) boasting a cumulative capacity of 4,000 megawatt hours (MWh).

Singh’s assertion underscores a stance that the levelised cost of storage inherent in pumped storage projects stands on solid economic ground, obviating the necessity for additional financial support through viability gap funding. The Minister’s clarification brings into focus the nuanced approach adopted by the government, distinguishing between the economic viability of different storage technologies.

The government’s decision not to extend viability gap funding for pumped storage projects aligns with its strategic outlook on financial allocations, emphasising the self-sufficiency of certain technologies. This move is in contrast to the proactive step taken earlier to endorse a significant viability gap funding amount for battery energy storage systems, reflecting the government’s commitment to fostering advancements in energy storage capabilities.

Union Minister RK Singh elucidates the government’s stance on the financial support for pumped storage projects, rooted in the perceived economic viability of their levelised cost of storage. As the energy landscape continues to evolve, the government’s discerning approach to viability gap funding reflects a nuanced understanding of the diverse economic dynamics within the renewable energy sector.