Delhi’s BESS Concessional Financing Model Reduces Risks And Costs For DISCOMs: Umang Maheshwari, MD, BESS

Recently, Delhi's Kilokri area received a 20 MW Battery Energy Storage System (BESS) installation to ensure residents receive uninterrupted electricity supply during peak hours. Such projects are costly and risky affairs. The total cost of the project is around $14 million, of which $10 million has been financed at a concessional interest rate of just 1 percent. This project was funded using concessional capital from the Global Energy Alliance for People and Planet, a global philanthropic initiative. We provided 70% of the financing as debt, while the remaining 30% equity was contributed by the private project developer.

To understand the financing and cost structure of the setup, ResponsibleUs speaks with Umang Maheshwari, Managing Director, BESS. He explains the project's finances and more.

How was the project financed? 
This project was funded using concessional capital from the Global Energy Alliance for People and Planet, which is a global philanthropic initiative. We provided 70% of the financing as debt, and the remaining 30% equity was contributed by the private project developer.

The total project cost is around $14 million, and we financed $10 million at a concessional interest rate of just 1%. The reason for concessional financing is simple: batteries are expensive, and both the Delhi utility and the regulator want to keep electricity tariffs low. As this is the first-of-its-kind project, concessional capital helps make it feasible.

However, as battery prices continue to fall over the next few years, such concessional support will no longer be necessary. We expect that future projects of this kind will be self-sustaining and commercially viable. And yes, in general, all infrastructure projects follow a similar debt-to-equity structure.

What factors are currently limiting banks from financing battery storage projects, and what would encourage them to invest more actively?
Now, once these commercial projects scale, banks will start financing them. Right now, however, banks are hesitant to invest because these battery storage projects have not yet proven themselves at scale. That's where risk-tolerant funders like us-philanthropies and charitable organisations-step in. We are mandated to provide de-risking capital to help demonstrate the viability of such early-stage technologies.

Once these projects become commercially viable and deliver proven results, mainstream lenders like banks will come onboard. In fact, the World Bank is already a partner in the Global Energy Alliance for People and Planet. They, along with the Asian Development Bank and other large multilateral agencies, are also looking to finance battery storage projects, although they typically do this through government-backed funding mechanisms.

Any challenges in engaging with the government?
Yes-primarily around policy and regulatory frameworks. Currently, there aren't enough enabling policies that allow battery storage to realise its full potential. Batteries can offer multiple services to the grid-like frequency regulation, load balancing, and peak shaving-but there are no provisions in the existing regulations to monetise these services.

So, the government needs to fast-track policy and regulatory reforms. This includes revisiting market design, creating mechanisms to allow battery participation in power trading, and enabling compensation for the full range of services batteries provide. Only then can the true economic and environmental value of battery storage be unlocked.

Given this project was launched around World Environment Day, do you have any reflections?
Absolutely. One of the biggest challenges with renewable energy is intermittency-the sun shines for only 4-5 hours a day, and wind is only available for 2-3 hours. What batteries enable is 24x7 clean power by storing excess solar and wind energy during the day and dispatching it during peak evening hours.

This makes batteries essential for achieving a 100% net-zero power grid. The Indian government has set a net-zero target for 2070, and battery storage will play a critical role in decarbonising the power sector by ensuring that electricity supplied to consumers comes from renewable sources like solar and wind.

You also mentioned that battery-backed solar power can offer cheaper electricity. How is that possible?
It's quite straightforward. These batteries are charged using solar power, which is one of the cheapest forms of electricity during the day. They then release that stored energy during the evening, when fossil fuel-based electricity-like coal or gas-is much more expensive.
So instead of the utility buying costly power from gas plants or electricity exchanges in the evening, battery systems can supply cheaper, stored solar power, thus reducing the overall cost of electricity for consumers.

If batteries aren't available, utilities are forced to buy expensive fossil-fuel-based power, which drives up tariffs. That's why battery storage is not just an environmental solution-but an economic one too.

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