The Ministry of Power (MoP) has directed states and procuring entities to ensure a minimum of 20% local content in the procurement of battery energy storage system (BESS) projects being implemented under the viability gap funding (VGF) program, supported through the Power System Development Fund (PSDF).

In a communication addressed to the energy departments of 15 beneficiary states and NTPC, the Ministry said the requirement would apply for the disbursement of funds under the PSDF guidelines.

The directive follows multiple requests from beneficiary states seeking an exemption from the Public Procurement (Preference to Make in India) Order for the implementation of BESS capacity under the program. Some states also noted that, during the PSDF techno-economic sub-group meeting, they were advised to approach the Ministry for such an exemption.

However, the Ministry clarified that BESS is currently not included in the list of power sector items notified for procurement exclusively from Class-I local suppliers under the Public Procurement (Preference to Make in India) Order issued by the Department for Promotion of Industry and Internal Trade, or any order from the Ministry.

The Ministry also provided flexibility for tenders that have already been issued without local content provisions. In such cases, states may obtain an undertaking from bidders to comply with the minimum local content requirement and proceed with awarding contracts.

As per the previous amendment to the VGF guidelines, the Ministry has already mandated the indigenous development of the energy management system (EMS) application software for all BESS capacity implemented under the program. The 20% minimum local content requirement will include the indigenously developed EMS application software.

Renewable energy implementing agencies must also ensure that the BESS used in the projects meets the requisite quality standards based on the best practices in the industry. It strictly prohibits the use of refurbished battery cells in any project.

Under the second tranche of the VGF program, ₹1.8 million (~$21,043)/MWh will be provided to support the development of 30 GWh of BESS capacity. Of the proposed 30 GWh, 25 GWh of storage capacity has been allocated across 15 states to help them address their energy storage requirements. NTPC will develop the remaining 5 GWh.