It will be a continuation of the focus on renewable energy in the July 2024 Union Budget, as the sector is assuming significant importance in overall power capacity growth. In FY24, renewable energy contributed to the addition of 71 percent of new capacity for India—a clear case of expanding influence.
Solar Power:
India has made remarkable strides in solar power. In FY24 alone, the nation installed 15 GW of solar capacity powered by dropping system prices and huge government backing. Programs such as the PM Surya Ghar Muft Bijli Yojana provided fiscal backing for 3 kW solar power in every household, thereby stimulating the adoption of rooftop solar. To meet its 2030 target, this accelerated expansion would need to be more drastic, however, Solar capacity additions could greatly increase with the extended sunset date of the concessional corporate tax rate of 15% for new projects starting by March 2024.
While onshore wind capacity expanded by a muted 3 GW in FY 24, the sector continues to face many challenges: it has a lack of robust domestic equipment ecosystems and project execution hurdles. It is critical for onshore wind to ensure a net-zero power grid because of high energy output and steady availability. Siloed offshore wind is at an even earlier stage of development and, if brought to the grid, would represent an even bigger change. Innovative financial instruments could also include rolling out contracts for differences, which have shown promising results in other markets to improve the pace of capacity addition.
Focused squarely on a net-zero future, nuclear power, consequently, does look like a plausible course. However, it does face innumerable problems: high costs, extended gestation period, and the fact that there is not sufficient institutional focus has come in the way of its proper advancement. Next week’s budget could do much to expedite the development of nuclear power by providing the much-needed impetus to this sector.
Energy Storage
A reliable renewable energy system requires energy storage with appropriate policy and regulatory support. Much-needed impetus was given through the battery energy storage system, with the 2023 budget specifying Rs 3,760 crore for it. This triggered a large jump in capacity addition under execution for BESS. Further support in the form of GST input credit for the supply of renewable power for captive Hydrogen production and rationalization of GST rates to appropriate levels with matching on-par customs duties shall be required.
Pumped Storage Plants:
Another benefit that Pumped Storage Plants provide is a source of storage that is domestically supplied. These are included in all countries through federal routes because of their importance in grid energy security. The next budget can also provide some incentives so that such capabilities of energy storage in India can be boosted.
Green Hydrogen:
The National Green Hydrogen Mission, therefore, will also be picked up through this, which would help include green hydrogen expansion within the energy mix of the country. Therefore, support for sunrise technologies would be green hydrogen and long-duration energy storage systems. The recent NTPC 600 kW/3000 kWh long-duration storage tender represents observed positive intent; further support could set this new technology on rapid growth.
Decarbonization of existing infrastructure, mainly in transport, buildings, and industries, must be scaled up as a matter of priority. Budgetary allocations for projects that minimize carbon emissions in hard-to-abate sectors are worthwhile; green ammonia in fertilizers, for example, or green hydrogen in the production of steel, or Carbon Capture, Utilisation, and Storage in cement. legislative examples can be derived from the EU’s Carbon Border Adjustment Mechanism and the USA’s Clean Competition Acts.
Offshore Wind:
Approval of VGF for 1 GW offshore wind lights up the hopes more when it comes to increasing the developer’s confidence in bankability. Wind and long-duration energy storage systems, generally providing energy from 7-8 hours, can provide balancing to fossil-fuel-based power during non-solar hours. NTPC’s show in long-duration storage may witness more action with additional backing.
Electric Vehicles:
Rising sales of EVs are good to see. The FAME 2 program can be continued with improvements, and here I emphasize the intercity e-buses and private bus segments. The reduction of GST on EV charging service taxes and reduction in customs duties on battery parts would vastly speed up EV and stationary storage adoption. The sodium ion battery technology is now catching up and is an effective replacement for the lithium-ion cell. It deserves similar concessions for the growth of the industry and technological diversification.
If India does this, then the upcoming Union Budget can go a long way in rejuvenating the renewable energy sector, thereby setting the course for a green and resilient energy future.