Budget 2024-25: Will measures taken for the renewable energy sector help achieve 2030 goals?

Yesterday, on July 23, Union Finance Minister Nirmala Sitharaman presented her seventh Union Budget which allocated Rs 19,100 crore for the Ministry of New And Renewable Energy. 

The Budget also emphasised the government's focus on energy security and employment generation in the clean energy sectors.

Further, guidelines on various energy transition pathways will be released to decarbonise the energy sectors, skilling initiatives to improve availability of skilled workforce towards implementing energy transition.

Due to the Lok Sabha elections held in April-May, the government was constrained and had presented an interim Budget to the House. 

This interim Budget allowed the government to allocate limited funds until the election results were announced and a newly elected government assumed office.

The allocation for the solar energy sector was Rs 10,000 crore, an increase of 110 per cent from Rs. 4,757 crore which were allocated in the Union Budget of FY 2023-24). The increase in allocation is on account of a new scheme launched for the rooftop sector (PM Muft Bijli Yojana), besides higher allocation towards existing solar schemes and initiatives.

The rooftop saga

The growth in solar energy has been primarily from the ground-mounted (utility-scale segments) while the rooftop has lagged behind in target installations. Of the 85.4 GW of solar capacity, rooftop solar (RTS) contributes only 12.92 GW with the residential sub-segment contributing less than 4 GW.

The experience of rooftop installations in India has been plagued with implementation issues such as delays in subsidy disbursement, lack of anticipated response from power distribution companies (DISCOMS), export of electricity to the grid besides self-consumption (net-metering regulations), and the viability of current business models. 

As per the budget speech there have been nearly 12.8 million registrations on the dedicated RTS portal with 1.4 million applications received since February 2024. In order to increase RTS penetration in India, the announcement of the PM Surya Ghar Muft Bijli Yojana (PM-SGMBY) with a combined outlay of Rs 75,000 crore till 2027 was made in the interim budget 2024. 

However, this Budget doesn’t mention any fresh announcement for the RTS. 

The PM-SGMBY focuses exclusively on residential rooftop installations with a target of 10 million households.

The past experience from RTS calls for streamlining of procedural and implementation aspects. 

Such as the issues around strengthening DISCOM level interface (both financial and technical), credit availability from high upfront capital costs, and consumer awareness and sentiments have to be addressed simultaneously.

Assessing Budget offerings for bioenergy

The interim budget announced earlier had laid the groundwork for significant advancements in biofuels, particularly through the phased introduction of Compressed Biogas (CBG). 

This initiative aimed to establish 750 CBG projects by 2028–29 with an investment potential of Rs 37,500 crore towards widespread adoption in vehicles to reduce pollution and households for clean cooking.

Despite the government’s ambitious bioenergy goals, the Union Budget 2024-25 made no significant announcements for the sector. The government aims to reach 20 per cent ethanol blending with petrol by 2025 and establish 5,000 CBG projects across the country in the next few years. 

CBG producers had anticipated  support for bio-slurry or fermented organic manure (FOM) generated as a by-product, which would enhance the economic sustainability of these plants beyond the Rs 1,500/ton market development assistance announced last year. Additionally, the demand for creating biomass banks to store feedstock year-round was left unaddressed. 

Although the government has prioritised skilling, it is essential that bioenergy upskilling is included in this programme to train bioenergy plant operators. Additionally, the initiative to promote natural farming among 10 million farmers should incorporate bio-slurry generated from CBG projects as a key input to reach this milestone.

Reliance on import of critical minerals

With the evolution of rapid technological advancements in supporting the growth of industrialisation in India, the role of critical minerals assumes extreme significance. 

They have emerged as an essential building block in a host of technologies to mitigate climate change and improve clean energy development. 

However, India is heavily dependent on the import of raw materials and components. In FY 2023-24, India incurred Rs 430 crore in procuring solar panels, an exponential increase of 361 per cent (Rs 94.3 crore) when compared to FY 2022-23.

The lack of geographical availability of these minerals within India leads to increased reliance on global supply chains which are prone to variations in prices and supply as per the global shifts, as witnessed during the COVID-19 pandemic and more recently from the geo-political crisis emerging from Europe and the Middle East.

Securing an assured supply of these commodities is essential for various developmental and net-zero pathways envisioned by India.

The announcement in the budget 2024 towards exemption of Basic Customs Duty (BCD) on imports of 25 critical minerals important for the renewable energy sectors in India. 

Previously India had a BCD of between five per cent-10 per cent on these minerals and the current move is expected to improve domestic procuring, refining and supplying capacities. 

But examining their critical role in the national economy and an increasing net-demand in nearly all industrial applications, this measure in itself may prove to be insufficient. 

While India holds some deposits of these minerals, most (and often the most demanded) are largely imported, mainly because of lack of technology and research development on viable extraction in India.

Besides exemption of BCD on key critical minerals, there should be parallel measures such as increased budgetary allocations towards creation of domestic R&D measures by establishing appropriate strategies for geotechnical assessments, developing extraction technologies and collaborating with other scientific departments such as atomic energy and space research, commerce and industry.

Further there is huge capital savings and job creation potential from enhancing recycling, and reuse capacities of materials from end-of-life cycle of products.

Currently, the market development is more skewed towards mining unprocessed materials than developing adequate capacities in metallurgical grade recycling and purification techniques. The creation of a recycling ecosystem will secure domestic supply chains and generate jobs.

Policy for pumped hydro storage

In order to address intermittency in generation from an increasing use of RE resources, the requirement of energy storage gains significance. The use of pumped-hydro storage plants is key towards meeting peak energy demand ahead. 

The plans of developing a policy on Pumped Hydro Storage is a need of the hour, this will assist in meeting energy storage obligations and targets for energy storage requirements.

Currently, there are several barriers in adoption such as ecological challenges, project timelines and financial viabilities.

Gone with the wind

The wind energy sector has been marred by recent policy inconsistencies such as change from feed-in tariff to reverse bidding and back to former. 

There was anticipation in the wind energy sector about fresh allocations and the addition of new capacities.

However, the Budget 2024 missed on creating investment opportunities in the wind energy sector. There were no announcements by the Finance Minister towards strengthening the wind ecosystem in India.

It is important to mention that Tamil Nadu is a leader in India’s wind energy sector, with wind power contributing nearly 30 per cent of the state’s installed capacity but only 15 per cent of generation due to ageing turbines. 

By replacing these old turbines with new, more efficient models, the state could significantly optimise wind energy production and potentially triple the capacity utilisation factor (CUF).

India has substantial potential for wind farm repowering (replacing older wind power plants with new ones), with a capacity of 25.4 GW, of which Tamil Nadu accounts for 7.3 GW. 

Repowering could harness advancements in wind technology for more efficient energy production. On-ground experience from visiting repowered wind farms in Tamil Nadu shows notable increases in energy generation and CUF.

However, constraints from power integration by the state utility (TANGEDCO) and the draft repowering policy have hindered these projects. 

The policy’s restrictive wind banking provisions, allowing only monthly banking and usage during non-peak hours, hinders optimal energy utilisation. Despite paying Rs 30 lakh/MW as Infrastructure Development Charges, developers face additional costs for substation upgrades and alternative power evacuation. Inadequate infrastructure, especially insufficient 11 kV lines, and fragmented ownership further undermine repowering efforts.

Nivit Yadav, Renewable Energy Programme Director at Centre for Science and Environment, told Down To Earth, “As India strives to achieve its goal of generating 500 GW of renewable energy by 2030, the measures outlined in this budget will be crucial in shaping a resilient and economically vibrant energy landscape. However, the Union budget speech reveals a clear mismatch with Modi 3.0’s vision and announcements for the sector”. 

“The renewable energy sector did not receive a clear and supportive message from the current government, leaving stakeholders uncertain about the future direction and commitment to renewable energy initiatives. This disconnect raises concerns about the alignment of policy and strategic objectives necessary to meet the ambitious 2030 target,” Yadav added.