Strengthening the Domestic Manufacturing Ecosystem

A major concern and hinderance for the fast-paced development of renewable energy sources in India continues to be its dependence on the import of raw materials and components. Despite significant progress in schemes like the PM Surya Ghar (Muft Bijli Yojana), which achieved over 600,000 rooftop solar installations in under a year, India’s dependence on foreign suppliers for key components like polysilicon, wafers, and solar cells remains a pressing issue. To overcome this, the PLI schemes must be expanded to focus on strengthening the upstream manufacturing ecosystem across the entire solar value chain. While the 2024-25 budget earmarked ₹6,250 crore for solar energy initiatives, the 2025-26 budget must prioritize domestic manufacturing to ensure India reduces dependence on imports for critical renewable energy components. Localizing the production of these materials will not only boost energy security but also promote long-term economic growth through job creation and technological innovation. It’s a challenge that is not insignificant but must be addressed head on.

Green Hydrogen: Scaling Up Investments and Infrastructure

The National Green Hydrogen Mission, which received a ₹600 crore allocation in FY 2024-25, can be an important step toward decarbonizing sectors like shipping, fertilizers, and petrochemicals. However, to truly position India as a global exporter of green hydrogen and its derivatives (such as ammonia, methanol, and ethanol) the upcoming budget must significantly increase financial support. Green hydrogen has the potential to be a game-changer for the Indian energy sector, provided there is adequate infrastructure for electrolyzer production and hydrogen hubs and efforts are made to create a demand side market. This is particularly critical for reducing the cost of hydrogen production and building a resilient supply chain. To accelerate this transition, the government must incentivize the local manufacturing of electrolyzers, utilizing a combination of capital subsidies, tax breaks, and innovative financing mechanisms. Furthermore, R&D investments must be prioritized to improve the efficiency of green electrolysis and make green hydrogen cost-competitive with fossil-based alternatives.

Additionally, the integration of the Carbon Credit Trading Scheme (CCTS), set to launch in FY 2026, offers a market-based solution to incentivize investment in green hydrogen technologies. By allowing companies to offset emissions through carbon credits, the CCTS will drive broader adoption of hydrogen technologies, accelerating India’s transition to a low-carbon economy.

Battery Energy Storage Systems (BESS): Ensuring Grid Stability

A critical barrier to maximizing renewable energy in India is the intermittent nature of solar and wind power. Without adequate storage solutions, significant portions of generated energy go unused during periods of high production. This is where Battery Energy Storage Systems (BESS) come into play. BESS enables the storage of surplus energy generated during peak hours, ensuring its availability during periods of high demand or low generation. This is essential for achieving grid stability and ensuring reliable power supply.

The Union Budget must allocate significant resources to grid-scale energy storage projects to bridge the gap between renewable generation and grid requirements. Expanding financial support for BESS will help reliance on fossil fuels and improving the overall efficiency of the energy system. Furthermore, promoting innovation in hybrid renewable-plus- storage models, where solar or wind farms are paired with co-located storage systems, will provide a cost-effective and efficient solution to energy storage challenges. These innovations must be incentivized through strategic policy measures and financial support.

India’s renewable energy future hinges on the actions taken in the Union Budget. To sustain and accelerate the country’s progress toward its renewable energy targets, a decisive increase in funding for BESS deployment, green hydrogen infrastructure, and domestic manufacturing of solar components is essential. With the right mix of investments, regulatory reforms, and technological innovation, India can solidify its position as a global leader in the green energy transition, to meet its committed targets.

This article was originally published in The Economic Times on 1 February 2025 Written by: Deepto Roy, Partner. Click here for original article

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