Union Budget 2025-26 to be presented on February 1 will bring several incentives to the renewable energy sector as India focuses on achieving 500 GW of green energy capacity by 2030 Possibly.
The renewable energy industry has received further support from Finance Minister Nirmala Sitharaman to increase local equipment manufacturing, SOPS for adoption of green technologies, higher allocation of renewable energy, and duty differentials to support domestic players. We look forward to announcing measures.
The renewable energy sector has seen budget support more than double in the past two years. Compared to the revised budget estimates for FY 2023-24, the total allocation of Ministry of New and Renewable Energy (MNRE) for FY 2024-25 has increased to Rs 19,100 crore for FY 2024-25.
Key industry expectations from Budget 2025-26 include:
Incentivizes battery storage production
The industry expects a push toward battery storage. This is essential to ensure stable power supply and green energy integration.
Industry players are calling for measures to address implementation challenges in the new and emerging technology space within renewable energy and encourage local manufacturing. Governments may announce measures to support local battery supply chains and manufacturing, primarily to reduce dependence on imports from China.
Measures to boost private PSU partnerships
More measures are expected to increase the participation of private and public sector undertakings (PSUs) in the green energy transition to achieve the 2030 target and net zero status by 2070. Waste reduction is expected as such technologies require high capital costs and a long-term horizon of 10-15 years.
Incentives for manufacturing solar cells
Green energy sector observers want Union Budget 2025 to include more SOPs to promote local manufacturing of solar cells and green hydrogen. Support measures may be announced to attract foreign funding and boost research and development (R&D) activities in the sector.
Higher allocations for offshore wind and large-scale solar projects
Offshore wind and large solar projects are likely to receive higher budget allocations as the country looks to diversify its renewable energy portfolio. Similarly, higher allocations for emerging technologies, carbon markets and green hydrogen production are expected.
Critical mineral support measures
The government could focus on critical minerals such as lithium, copper, cobalt and rare earth materials. These are essential for sectors such as nuclear energy, renewable energy, space, defence, communications and high-tech electronics.
In the last budget, the government completely waived customs duty on 25 critical minerals and reduced the Basic Customs Duty (BCD) on two of them to facilitate processing and upgrading of such minerals. Further friendly steps in this direction will ensure easy availability of such critical minerals for renewable energy players.
Supporting the adoption of green energy
The government, in the last budget, announced policy measures like Prime Minister Surya Ghar Muft Bijli Yojana to boost the adoption of green energy by the masses. The yojana was launched to set up rooftop solar power plants, allowing 1 trillion households to get up to 300 units of free electricity every month.
The renewable energy sector saw significant improvement in energy capacity additions last year. A total of 27 GW of renewable energy capacity was added during the 2024 calendar year. In November 2024, the installed non-fossil fuel capacity was 214 GW, an increase of 14% compared to 187.05 GW in the same period last year. Of this, solar energy capacity was 94.17 GW and wind energy capacity was 47.96 GW.
Major renewable energy stocks are under pressure ahead of Union Budget 2025. The stakes of major players in the industry such as WaareeEnergies, KPI Green Energy, NTPC Green and Adani Green Energy have declined by 60% since inception. Month compared to NSE closing price on January 1st.
(*Closing price on January 27th)
