Budget 2025: Experts Urge Bigger Boost for Renewable Energy—Will the Government Deliver?
As the Union Budget approaches, experts anticipate ongoing financial support for India’s renewable energy sector. The government is expected to maintain its focus on local manufacturing and incentivizing clean energy infrastructure.
In the renewable energy sector, analysts are closely monitoring potential measures to stimulate growth, address implementation challenges, and promote local manufacturing in emerging areas within renewables. India has set an ambitious target of achieving 500 GW from non-fossil sources by 2030.
The Ministry of New and Renewable Energy (MNRE) allocated approximately Rs 19,100 crore in 2024-25, marking a 143 percent increase from the previous fiscal year. The majority of this allocation, around 45 percent, was directed towards solar power grids. The PM Surya Ghar Muft Bijli Yojana, approved in February 2024, received the second-highest funding allocation of approximately 33 percent.
Experts suggest that there may be announcements related to battery storage, a crucial component for renewable energy integration. The government aims to promote a local battery supply chain to reduce dependence on imports, particularly from China. While there is already a production-linked incentive (PLI) for batteries, additional duty support may be introduced to encourage local manufacturing. However, experts caution that increasing duties could raise battery costs, necessitating a careful balance.
Rupesh Sankhe of Elara highlighted that the total allocation for renewables has doubled over the past two years, with expectations for continued higher budgetary allocation. These technologies require long-term investments, spanning 10-15 years, and with significant capital costs, expertise is essential. The government must allocate more resources to encourage private and public sector participation. Sankhe also noted the government’s focus on smart metering and distribution initiatives.
The distribution scheme announced in 2021 has been revamped to focus on smart metering. Out of the 25 crore meters, 12 crore have already been sanctioned and installations are underway. The remaining 13 crore meters will also undergo tenders and installations in the coming years.
Sankhe emphasized the importance of green bonds to support financing, stating, “Given the substantial capital requirements for capacity addition and infrastructure investment, green bonds could play a crucial role.” He also suggested expanding initiatives like rooftop solar, which received a positive response last year.
Vinit Bolinjkar from Ventura Securities believes that the renewable energy sector will benefit from long-term government policies, and the upcoming budget may introduce additional measures to strengthen this sector. The transition towards cleaner energy is expected to accelerate in the future.
Challenges and solutions
Execution has been a persistent issue in the renewable energy sector, with 14-15 gigawatts of renewable energy installed year-to-date, including 12 gigawatts of solar power. Despite an expected increase in installations in the fourth quarter, the total installations for FY25 are projected to remain in the 20-25 GW range. Challenges such as land acquisition, transmission constraints, delays in equipment procurement, and PPA signings by DISCOMs continue to hinder progress.
Vinit Bojinkar from Ventura Securities added that while there have been advancements in new areas, the main challenge lies in achieving cost-effective solutions. For instance, India has developed a hydrogen locomotive engine with a 1200 HP power capacity, making it the first country in the world to do so.
India’s development of 1200 HP power engines fueled by hydrogen, with railways as a major consumer, is a promising advancement, according to Bojinkar. This breakthrough is expected to stimulate investment in hydrogen production, potentially increasing demand and leading to more funding for hydrogen production. Bojinkar anticipates significant progress in the industry by FY27.
In terms of stocks to watch, the sector’s growth potential is evident in market trends, including rising investments in storage and pump storage projects that support the government’s green energy initiatives. Bojinkar sees opportunities within Adani Green Energy and NTPC. While NTPC shows promise, NTPC Green still faces challenges in acquiring land and launching projects. Despite potential corrections, NTPC Limited is considered a strong investment at its current level.
Experts note a healthy market correction, making certain stocks more appealing. However, sectors like solar cell manufacturing may be strained due to potential oversupply. The focus remains on the government’s commitment to green transition and renewable energy technologies. Government spending is primarily directed towards roads, highways, defense, and railways, with power companies playing a key role. As the green transition progresses and government policies support investments, renewable energy companies and financing entities like PFC and REC will be in the spotlight.
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Disclaimer: This blog post is for informational purposes only and should not be considered financial advice. Investors should conduct thorough research and consult with a qualified financial advisor before making any investment decisions.