India Plans New Funding Support to Build Energy Storage for Cleaner Power

India Plans New Funding Support to Build Energy Storage for Cleaner Power

January 31, 2026

India’s government is developing a new viability gap funding (VGF) programme to help build large-scale energy storage systems, aiming to make the country’s electricity grid more stable and boost the use of renewable energy. A draft proposal for this funding, which would cover both pumped storage projects and battery systems, has been sent by the Ministry of Power to the Department of Expenditure for approval, according to people familiar with the plan.

Under the proposed scheme, financial support would be provided to lower the upfront costs of critical storage infrastructure so that developers and utilities can adopt these technologies more quickly. Earlier VGF schemes focused mainly on battery storage and supported around 13.2 GWh and 30 GWh of capacity through capital cost subsidies, but did not include pumped storage, which uses water reservoirs to store energy for longer durations.

Energy storage is seen as vital for managing the intermittent output of wind and solar power. Without storage, surplus renewable electricity generated during midday can be wasted, and the grid can struggle to meet demand during peak hours in the morning and evening when renewable generation drops. By storing excess power and releasing it when needed, storage systems help balance supply and demand, support grid reliability, and reduce reliance on traditional fossil-fuel plants.

According to projections by the Central Electricity Authority, India will require about 290 GWh of energy storage capacity by 2029-30 and 450 GWh by 2031-32 to effectively support its growing renewable energy share in the electricity mix. The new VGF initiative aims to attract investment and accelerate deployment of both Battery Energy Storage Systems (BESS) and Pumped Storage Projects (PSPs) to meet these rising needs.

Industry officials say that including pumped storage alongside battery systems in the funding framework is important, as each technology serves different roles: battery systems are more suitable for short-duration balancing, while pumped storage can provide longer-duration energy support. Expanding both types of storage will be crucial for a more flexible, reliable and clean power system as renewable capacity grows across India.