Clean energy goal requires more investment in green infrastructure
Union Budget 2024-25 had marked significant strides in bolstering India’s power sector, with noteworthy allocations for both the Ministry of Power (MoP) and the Ministry of New and Renewable Energy (MNRE). The MoP was allocated ₹20,502 crore, reflecting a 16 per cent increase over the previous year’s revised estimates. A major portion, 61 per cent, was earmarked for the Revamped Distribution Sector Scheme, emphasising improved efficiency in distribution companies, with a focus on prepaid smart meter installations. Meanwhile, the MNRE’s allocation soared by 143 per cent to ₹19,100 crore, driven primarily by PM Surya Ghar Muft Bijli Yojana, to provide financial assistance for rooftop solar installations.
Investments in grid-connected solar power projects were set to grow by 79 per cent, underscoring India’s commitment to renewable energy. However, with capital expenditure accounting for only 5 per cent of the MoP budget and a negligible 0.1 per cent of the MNRE allocation, the budget highlights the need for enhanced focus on infrastructure development. These allocations present a critical opportunity to reassess priorities for the 2025 budget to ensure robust, sustainable growth in India’s power sector.
Owing to Government initiatives, public awareness and international dialogue, India is actively aiming at diversifying its energy sources. As of the first quarter of 2024, fossil fuels contribute 56.8 per cent (237 gw) of the total installed capacity, maintaining a significant share in the energy market. However, renewable energy sources, including solar, wind, hydro, waste-to-energy, and biomass, have surged to 41.4 per cent (172.54 gw) of the installed capacity, highlighting substantial progress.
But, despite considerable strides in terms of initiatives and policy interventions, several shortcomings and challenges persist. The transition to clean energy remains hindered by an overreliance on fossil fuels, while renewable energy (RE) capacity addition has fallen short of targets. As of June 2024, solar and wind capacities stood at 85 gw and 47 gw, respectively, missing the 2022 targets of 100 gw and 60 gw, due to land acquisition issues, clearance delays, contractual disputes, and Covid-19-induced disruptions.
Financing challenges exacerbate these issues, with a ₹1.5–2 lakh crore annual investment requirement for RE, against actual investments of ₹75,000 crore. The rooftop solar programme also lags, achieving only 10.4 gw of its 40 gw target by 2023, plagued by grassroots-level information gaps, procedural delays, and subsidy issues. Similarly, the PM-Kusum scheme has struggled to solarise agricultural pumps and add 10 gw of small solar plants, citing lack of affordable finance and state subsidies.
Storage capacity development, critical for integrating intermittent solar and wind power, is progressing slowly, with affordability and technology being key barriers despite policy initiatives like viability gap funding and PLI schemes. Also, the PLF of coal-based plants declined from 84 per cent in 2009-10 to 57 per cent in 2022-23, reflecting surplus capacity, low demand, and renewable energy penetration. Transmission infrastructure also lags, with only 81 per cent of the targeted 1,10,281 ckm of transmission lines added between 2017-22, owing to right-of-way issues, land acquisition delays, and contractual disputes. These gaps highlight the need for more robust policy frameworks, financial mechanisms, and streamlined implementation to achieve the energy transition goals effectively.
To address these challenges and stay on track with our climate commitments, the budget should prioritise targeted interventions and innovative financial mechanisms. Fundamentally, increased allocation for renewable energy infrastructure, including subsidies for solar and wind projects, is critical to overcoming the obstacles to efficient energy ecosystems, such as land acquisition deadlocks, clearance delays, and financing gaps.
Expanding green financing options, such as green bonds and Renewable Finance Obligations for banks, can mobilise the ₹1.5–2 lakh crore annual investment. Strengthening state-level coordination under national initiatives like PM-Kusum and PM Surya Ghar Muft Bijli Yojana with simplified procedures, timely subsidy disbursals, and awareness campaigns at the grassroots level will help boost adoption. Focus on scaling domestic manufacturing of solar panels, advanced batteries and energy storage systems under the PLI scheme, along with addressing raw material dependency via global partnerships, can reduce reliance on imports while incentivising innovation in advanced technologies.
Revising regulatory frameworks to address barriers in open access, ensuring fair pricing, and improving grid transparency will encourage competition and provide consumers with more power procurement choices. These measures, combined with a cohesive long-term vision, can drive India’s clean energy transition and strengthen its power sector.
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Shishir Priyadarshi, a former IAS officer, is the President of Chintan Research Fondation (CRF), and Kalyani Shukla is Research Assistant at CRF
