The Union Budget 2024-25 offers valuable insights into the government’s evolving strategy for our industry. This budget presents a mix of continuity and fresh initiatives, building on past efforts while introducing new directions that could reshape the renewable energy landscape.
Linking Energy Transition with Job Creation
The 2024-25 budget signals a more integrated approach by explicitly linking energy transition with job creation and sustainability. This marks an evolution from previous announcements, where the focus was mainly on scaling renewable energy capacity and ensuring grid stability.
The government’s introduction of a document that ties energy transition to job creation is particularly noteworthy. This move not only drives economic growth through clean energy but also ensures that the benefits are more evenly distributed across the population. It builds on earlier initiatives but with a clearer emphasis on socio-economic impacts, potentially fostering broader public support for large-scale renewable energy projects.
Support for Traditional Industries in Green Transition
A significant highlight of this year’s budget is the targeted financial support for traditional micro and small industries in 60 clusters to help them transition to cleaner energy forms. This initiative is a more focused and structured continuation of previous efforts to encourage cleaner technologies in traditional industries, which often faced challenges due to fragmented support.
However, the success of this initiative will hinge on the timely and efficient disbursement of funds and the ability of these industries to overcome technological and operational challenges. Ensuring that the support reaches the intended beneficiaries without bureaucratic delays will be crucial for its effectiveness.
Advancing Energy Storage with a Focus on Pumped Storage
Energy storage has long been recognized as a critical component of India’s renewable energy strategy, especially as the country scales up its solar and wind capacities. The 2024-25 budget takes a decisive step by announcing a dedicated policy for pumped storage, reflecting a stronger commitment to addressing grid stability as renewable energy penetration increases.
Storage systems are vital for mitigating the intermittency of renewable energy sources and ensuring a stable power supply. The new policy can attract significant investment, providing the necessary regulatory framework and incentives to draw both domestic and international players in the PSP domain.
A Boost for Carbon Markets
The budget advances India’s climate strategy by transitioning “hard to abate” industries from the “Perform, Achieve and Trade” (PAT) framework to a robust Indian Carbon Market (ICM).
Building on the May 2023 announcement, this shift aims to price GHG emissions and incentivize reductions through carbon credit trading. While challenges like regulatory changes and effective carbon pricing remain, the ICM presents opportunities for innovation and global market integration.
Climate Finance Taxonomy
The Centre has announced a taxonomy to classify economic activities that support climate commitments and other environmental goals. This initiative is much welcome. IEA estimates1 that India require ~ US$160 billion per year between 2023 and 2030 to achieve its 2070 targets, and a taxonomy will enable financing the country’s energy transition and simultaneously address greenwashing concerns.
Streamlining Land Records
There is a renewed focus on streamlining land records through next generation reforms. These include Unique Land Parcel Identification Number or Bhu-Aadhaar for all lands, digitization of cadastral maps, and establishment of land registry.
Streamlining land records and thereby land acquisition could significantly reduce project timelines and costs, making India a more attractive destination for renewable energy investment. However, past announcements were made with limited on-ground traction, so success will require close collaboration between central and state governments and clear communication with local communities to ensure their concerns are addressed and that they benefit from these projects.
Fostering Innovation and Technological Advancements
The budget also emphasizes the importance of innovation and technological advancements in driving the next phase of growth in the energy sector. Operationalization of the Anusandhan National Research Fund for basic research and prototype development and setting aside of ₹ 1 lakh crore financing pool for private sector-driven research at commercial scale is covering a wide spectrum of R&D. Setting up of Bharat Small Reactors and a focus on R&D of small and modular nuclear reactors build up on the earlier efforts to enable energy transition.
However, success in this area will depend on attracting and retaining top talent and ensuring sufficient funding for R&D projects. India’s R&D investment as a percentage of GDP stands at 0.64%, compared to China (2.41%), the US (3.47%), and Israel (5.7%), so clearly, we need to do more in this space as a nation. Encouraging collaboration between industry, academia, and research institutions will be key to driving innovation and ensuring these advancements benefit the sector.
Conclusion: Balancing Ambition with Practicality
The Union Budget 2024-25 reflects the government’s ambitious vision for the renewable energy sector, building on past efforts while introducing initiatives that address some of the industry’s most pressing challenges. By linking energy transition with job creation, supporting traditional industries in their green transition, advancing energy storage and carbon markets, and fostering innovation, the budget lays a strong foundation for continued growth.
Initiatives such as the Critical Mineral Mission, focused on domestic production, recycling, and the acquisition of critical mineral assets abroad, along with rationalizing customs duties on minerals such as copper, lithium, cobalt, and rare earth elements, can significantly alleviate supply chain constraints in the energy transition sector. These measures will also promote domestic manufacturing of PV equipment, batteries, and other critical equipment.
However, realizing the full potential of these initiatives will require careful implementation, clear timelines, effective coordination among stakeholders, and a focus on addressing practical challenges. As we move forward, it will be essential to monitor the progress of these initiatives and ensure they align with broader sustainability and economic development goals.
The renewable energy sector has a unique opportunity to drive India’s transition to a low-carbon economy, creating jobs, reducing emissions, and enhancing energy security. By leveraging the support provided in this budget and building on the progress made in previous years, we can continue to lead the way in shaping a sustainable future for India and the world.
1 https://www.whitecase.com/insight-our-thinking/investing-india-path-net-zero
The author is Co-Chair, RE CEOs Committee
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