Tamil Nadu has taken a decisive step toward modernizing its grid with the approval of 1,000 MWh of standalone Battery Energy Storage Systems (BESS) under the Central Government’s State Component of the Viability Gap Funding (VGF) Scheme. In an order dated 4 December 2025, the Tamil Nadu Electricity Regulatory Commission (TNERC) cleared the procurement plan submitted by Tamil Nadu Green Energy Corporation Ltd. (TNGECL), authorizing long-term storage procurement for a 12-year period under a Build–Own–Operate (BOO) framework.
The initiative represents one of India’s most structured state-led storage deployments and is designed to help Tamil Nadu stabilize its renewable-heavy grid while reducing evening peak demand stress.
Project Overview: 500 MW / 1,000 MWh Across Six Substations
TNERC has approved the rollout of 500 MW (2-hour discharge × 2 cycles/day), totalling 1,000 MWh, across the following TANTRANSCO substations:
| Substation | Approved Capacity |
| Thennampatty | 100 MW / 200 MWh |
| Anuppankulam | 100 MW / 200 MWh |
| Ottapidaram | 100 MW / 200 MWh |
| Vellalaviduthi | 100 MW / 200 MWh |
| Kayathar | 50 MW / 100 MWh |
| Karaikudi | 50 MW / 100 MWh |
The storage systems will primarily charge using surplus daytime solar and discharge during Tamil Nadu’s morning and evening peak windows, significantly reducing the need for expensive short-term power procurement.
Winning Bidders & Tariffs
The competitive bidding process—held under a two-part tender with an e-reverse auction—resulted in tariffs below the state’s upper ceiling of ₹250,000 per MW per month.
Awarded Projects:
- Bondada Engineering – L1 bid: ₹2,46,000/MW/month, awarded 200 MW at Vellalaviduthi & Thennampatty
- Oriana Power – Matched L1, awarded 50 MW at Karaikudi
- NLC India Renewables—awarded 250 MW at Anuppankulam, Ottapidaram & Kayathar at ₹2,48,000/MW/month
All projects were selected within the L1 + 2% allocation band, as required under the reverse auction protocol.
Key Tender Details: What TNERC Approved
The BESS deployment follows the Ministry of Power’s 2022 Guidelines for Procurement & Utilisation of BESS, with TNGECL acting as project management authority and TNPDCL as the end procurer.
BOO Model with Symbolic Land Lease
- BESS developers will install and operate systems inside TANTRANSCO substations.
- Lease fee fixed at ₹1 per project per year for 15 years.
(Page 6)
Capacity Charges Basis
Developers are paid a monthly fixed charge per MW, factoring in VGF, land provisions, and charging supplied by TNPDCL.
Payment Security Mechanism
TNPDCL must provide:
- Revolving LC equal to 1 month of average billing
- Escrow Account equivalent to 2 months of billing
(Page 19)
Performance Standards (Highly Significant)
The BESS developers must ensure:
- 2 full operational cycles daily (morning and evening discharge)
- Minimum 95% annual system availability
- Round Trip Efficiency (RTE) ≥ 85%, with penalties below 85% and incentives above
- Guaranteed 100% minimum dispatchable capacity
(Pages 18–19)
These standards are among the strongest mandated by any state utility in India.
Commissioning Timeline & LD Provisions
- Projects must be commissioned within 18 months of BESPA signing
- Part commissioning allowed (up to 50 MW)
- LD via Performance Bank Guarantee (PBG) encashment for delays
- Delay beyond 9 months → capacity reduction + full PBG forfeiture
(Pages 16–17)
Viability Gap Funding Conditions
- Central VGF covers up to 30% of project cost (or ₹27 crore/MWh, whichever is lower)
- Developers must submit a Bank Guarantee for 100% of VGF amount before disbursal
- Delayed commissioning → VGF recovery with SBI MCLR + 5% interest
(Page 18)
BESPA Term & Obligations
- 12-year Battery Energy Storage Purchase Agreement between TNPDCL & developers
- Must be signed within 30 days of LoA or Commission approval
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