Tamil Nadu Approves Lease for 1000 MWh Battery Storage Project Across Six Substations

The Tamil Nadu Electricity Regulatory Commission (TNERC) has approved Tamil Nadu Transmission Corporation Limited (TANTRANSCO) to lease substation land for establishing Battery Energy Storage Systems (BESS) across six strategic locations in the state. 

This decision, announced on August 28, 2025, marks a significant step toward enhancing renewable energy integration in Tamil Nadu's power grid.

Project Overview and Strategic Importance

Tamil Nadu has been allocated 1000 MWh of BESS capacity under the Central Government's State Component of Viability Gap Funding (VGF) scheme, designed to support states with high renewable energy penetration. 

The project addresses critical grid stability challenges arising from the state's substantial renewable energy capacity of approximately 23,940 MW, which includes solar, wind, cogeneration, and biomass/biogas plants.

This initiative represents a near-term solution while the state awaits the completion of planned Pumped Storage Systems, which require longer implementation periods. It will particularly address the stress caused by ramping up and ramping down thermal energy sources when large-scale renewable energy is integrated into the Tamil Nadu grid.

Substation Locations and Capacity Distribution

The Commission has approved BESS installation across six strategically selected substations throughout Tamil Nadu. Thennampatty, Anuppankulam, Ottapidaram, and Vellalaviduthi substations will each host 100 MW/200 MWh capacity systems connected at 230 kV voltage levels. Meanwhile, Kayathar and Karaikudi substations will accommodate smaller 50 MW/100 MWh systems connected at 110 kV levels, bringing the total project capacity to 500 MW/1000 MWh.

The assets of Tantransco that would be utilised for the development of BESS Projects are only the surplus land which is not otherwise required for undertaking licensed transmission activities, and accordingly, the activities of the transmission will not be affected.

Financial Structure and Implementation Model

Under the approved arrangement, TANTRANSCO will lease its substation lands to BESS developers at an exceptionally nominal rate of INR 1 per project per year for 15 years. The project will be implemented under a "Build Own Operate" model, where private developers will establish the battery storage facilities on TANTRANSCO's premises.

The Central Government will provide Viability Gap Funding of up to 30 percent of capital cost for BESS or INR 27 lakh per MWh, whichever is lower, making this a non-recurring expenditure fully funded through central grants. 

Tamil Nadu Green Energy Corporation Limited (TNGECL) will oversee the implementation of this scheme, with charging power for the BESS to be provided by TNPDCL.