The Indian Government has consistently prioritized renewable energy in its national agenda, aiming to transition towards a more sustainable and resilient energy framework. In the pursuit of becoming a green energy giant, the Government sought to achieve an installed renewable energy capacity of 500 GW by 2030 as per the data of the Ministry of Power.
With an allocation of INR 19,100 crore, the Union Budget 2024 (“Budget”) underscores the Government's commitment to the development of the renewable energy sector, which remains crucial to India’s Sustainable Development Goal (“SDGs”) of becoming a net-zero economy by 2070. For instance, in the Interim Budget, presented in February 2024, Finance Mister Nirmala Sitharaman provided a small but much-needed boost to green energy via the announcement of the PM-Surya Ghar Muft Bijli Yojana which aims to incentivize citizens to install solar rooftops in households. This scheme also covers viability gap funding for harnessing offshore wind energy potential with an initial capacity of one gigawatt.
The aim is to hereby analyze the practicality of the ambitious targets set-forth by the Budget vis-à-vis the renewable energy sector of India.
One of the key highlights of the Budget has been the introduction of Pumped Storage Projects. In order to address the stagnation of renewable energy sources, the Budget proposed, “pumped hydro storage” as an effective solution that enables continuous generation of power. As a result, this project will help in meeting the peak energy demand and will support the growing renewable energy infrastructure.
Further, the Budget smartly recognized the potential of small modular nuclear reactors (SMRs) as a clean energy source. For this purpose, collaboration with the private sector to develop Bharat Small Reactors is a forward-looking initiative that could diversify India's energy mix and support the production of green hydrogen.
The Budget moreover introduced a new climate finance taxonomy aimed at facilitating access to preferential financing for green projects. This can mitigate the risks of greenwashing and attract international climate investments.
Lastly, the Ministry of New and Renewable Energy has been allocated Rs 19,100 crore, an increase of 143% over the revised estimate for 2023-24. This boost is primarily due to the introduction of the PM Surya Ghar Muft Bijli Yojana (PM-SGMBY), which aims to increase the penetration of rooftop solar (RTS) installations.
Despite the significant increase in funding, challenges persist. Firstly, in the RTS sector. These include delays in subsidy disbursement, issues with net-metering regulations, and the financial health of power distribution companies (DISCOMS). The Budget has been silent on any further specific initiatives for RTS (apart from PM-SGMBY). This raises concerns about future challenges and their redressal.
Secondly, although the budget has unlocked the potential of this sector in many ways, there have been certain missed opportunities. For example, despite its potential, the bioenergy sector did not receive significant attention in this year’s Budget. The Government had previously laid the groundwork for expanding the use of Compressed Biogas (CBG) with an ambitious target of 750 CBG projects by 2028–29. However, the Union Budget 2024-25 did not introduce any significant new measures for bioenergy. This raises concerns among the industry stakeholders about the sector's future growth.
Thirdly, another notable missed opportunity is the lack of support for bio-slurry, a by-product of CBG production, which could enhance the economic viability of bioenergy projects. The Budget did not address the need for biomass banks as well, which are essential for ensuring a year-round supply of feedstock. The absence of these measures may cause the bioenergy sector to face challenges in achieving its full potential.
India's dependence on imported critical minerals, essential for renewable energy technologies, has been a concerning issue. The Budget's announcement of an exemption from Basic Customs Duty (BCD) on imports of 25 critical minerals is a strategic move to secure these vital resources. However, this measure alone may not be sufficient to address the broader challenges of developing a self-reliant supply chain for critical minerals.
The wind energy sector, despite its potential, did not receive the boost that many industry stakeholders had hoped for in this budget, which the sector deserves. There were no new allocations or capacity additions announced, leaving the sector in a state of uncertainty. This is particularly concerning because of the challenges the sector has faced, including policy inconsistencies and aging infrastructure. The budget allocations could have been utilized for investment in repowering older wind turbines, more efficient models that could significantly increase energy production. However, the lack of supportive policies and the existing constraints from state utilities like TANGEDCO continue to hinder progress.
We import over 80% of oil needs, making it vulnerable to global price fluctuations and geopolitical tensions. India's solar capacity growth to 85 GW in 2023 has already started reducing our dependence on fossil fuel imports. It is also useful because of its Economic Competitiveness. As per December 2020 data, Gujarat Urja Vikas Nigam's (GUVNL) (Phase XI) auction for 500 MW of solar projects made a record for the lowest tariff of ₹1.99 (~USD0.025)/kWh. This sector holds the capability of addressing unique challenges including water crisis since
Thermal power plants require significant water resources. Maharashtra's push for solar power is partly driven by recurring droughts affecting thermal power generation capacity. Global investors are increasingly prioritizing Environmental, Social, and Governance (ESG) factors. This makes it pertinent that the future is renewable energy and India must make efforts now to compete with the world in the future. The budget was “A Mixed Bag with Potential” that addressed various issues but failed to recognize several fruitful regimes. We saw significant allocations to solar energy, critical minerals, and energy storage solutions. However, the lack of targeted support for sectors like bioenergy and wind energy left the sector vulnerable in various aspects. This may have an effect on the overall coherence of the renewable energy strategy.
Regardless of the missed opportunities, the measures outlined in this Budget will play a crucial role in shaping the country's energy landscape. However, to fully realize this vision, the Government will need to address the gaps identified in this Budget and ensure that all segments of the renewable energy sector receive the support they need to thrive. While the exemption is a welcome step for the short term, in the long term, we must focus on becoming self-sufficient as the dependency on imports cannot be a solution forever. For this, the Government needs to complement the importing capacity with increased investments in domestic research and development, as well as initiatives to recycle and reuse materials from end-of-life products. Establishing a robust recycling ecosystem could not only reduce India's dependence on imports but also create significant job opportunities. This way it will lead to multiplier effects.