Powering India’s future

As one of the world’s fastest-growing economies and the third-largest emitter of greenhouse gases, India’s role in the global fight against climate change is pivotal. The renewable energy sector in India, with its vast untapped potential, presents a promising pathway to achieving energy security, reducing carbon emissions, and creating millions of green jobs.

The government has set an ambitious target of achieving 500 GW of non-fossil fuel capacity by 2030, which includes 280 GW from solar energy and 140 GW from wind energy. This aligns with India’s commitment to achieving net-zero emissions by 2070 under the Paris Agreement. However, realising these goals necessitates substantial investments, with projections by Moody’s indicating that achieving the 2030 renewable energy targets would require an investment of approximately $385 billion.

Despite the strides, significant challenges remain, particularly in scaling up investments to bridge the gap between targets and reality. "The renewable energy sector in India is at a critical juncture where enhanced funding, robust regulatory frameworks, and a strong policy push are essential to meet the country’s ambitious goals by 2030. While private investments have significantly contributed to this sector’s growth, higher public spending is crucial to build a resilient ecosystem," says Arif Aga, Director, SgurrEnergy.

Challenges for renewable energy investment in India

High initial capital expenditure for infrastructure, such as solar panels and wind turbines, remains a significant deterrent for small-scale investors and enterprises, even though operational costs are low. Policy and regulatory barriers, including inconsistent policies and delays in obtaining clearances, further complicate investment decisions. The inadequacy of India’s grid infrastructure to accommodate the intermittent nature of renewable energy generation poses another obstacle, necessitating substantial investments in grid modernisation and energy storage systems.

The 2025 budget supports India's strategic renewable energy plan. “The Union Budget 2025 significantly advances India's renewable energy sector with the launch of the Clean Tech Mission, focusing on solar photovoltaics (PV), electric vehicles (EVs), and batteries, alongside the National Manufacturing Mission. The announcements underscore the government's dedication to strengthening ‘Make in India’ and becoming Aatmanirbhar in generation as well as storage of clean energy. This approach aims to reduce import reliance and build a robust domestic industry,” says Mr Shekhar Singal, Managing Director, Eastman Auto & Power Ltd.

Public investments are indispensable for catalysing the growth of the renewable energy sector. “Budget 2025 continues the momentum set in the previous year, focusing on clean-tech manufacturing, nuclear energy, electricity distribution reforms, and intra-state capacity expansion. A new mission for clean-tech manufacturing covering solar PV cells, electrolysers, EV batteries, and high-voltage transmission equipment will accelerate India’s path to Atmanirbharta,” says Vikas Gaba, Partner and National Head, Power and Utilities, KPMG in India.

Subsidising the cost of renewable energy technologies further can make projects more accessible, particularly for small-scale developers and rural communities. Investments in grid modernisation and energy storage systems are critical to integrating renewable energy into the national grid and addressing its intermittency.

“This budget provides a decisive push for clean energy, focusing on the critical pillars of “Make, Innovate, and Expand.” It effectively addresses core challenges while unlocking immense opportunities in the sector. A key highlight is the focus on clean tech supply chains, with a manufacturing mission for building domestic ecosystem for all critical clean technologies including transmission equipment. Duty exemptions for essential minerals like cobalt powder, lithium-ion battery scrap, and lead, alongside capital goods exemptions for 35 additional EV battery components, will strengthen domestic value chains,” says Anvesha Thakker, Partner, Business Consulting and National Lead for Clean Energy at KPMG in India.

"The Union Budget 2025 was expected to play a transformative role by scaling up financial allocations and incentivising green technologies like green hydrogen, solar, and wind energy. The National Green Hydrogen Mission, with a vision to produce 5 million tons of green hydrogen annually by 2030, exemplifies India’s commitment to decarbonisation and energy transition. Projects like NTPC’s green hydrogen facility in Andhra Pradesh, supported by 20 GW of renewable energy capacity, highlight the sector’s immense potential. Stakeholders anticipate substantial funding for R&D, tax holidays, and subsidies to make Indian green energy competitive globally," says Arif Aga, Director, SgurrEnergy.

Private sector participation is vital for scaling up renewable energy deployment. Corporate investments, particularly from Indian conglomerates and multinational companies, have played a significant role in setting up projects or entering power purchase agreements (PPAs). Foreign direct investment (FDI) has also been a significant contributor, facilitated by government reforms such as 100% FDI under the automatic route and ease of doing business initiatives.

Financial instruments like green bonds, used to raise funds for environmentally sustainable projects, have gained traction in India, alongside climate-focused funds and venture capital for innovative startups. Decentralized energy solutions, such as rooftop solar panels and microgrids, offer a promising area for private investment, catering to specific communities and reducing the burden on centralized grids. Furthermore, companies specialising in advanced technologies, including energy storage, artificial intelligence, and blockchain, can improve the efficiency and reliability of renewable energy projects.

Collaboration between public and private sectors is critical to unlocking the full potential of India’s renewable energy sector. "By introducing innovative financial mechanisms, enhancing public-private partnerships, and fostering international collaborations, the government can not only achieve its domestic targets but also position India as a global leader in renewable energy. A progressive budget can truly accelerate India’s journey toward sustainable energy solutions while unlocking economic and environmental gains," Arif Aga, Director, SgurrEnergy.

India’s renewable energy success stories highlight the effectiveness of these collaborative models. “India’s renewable energy sector stands at a pivotal juncture as we approach the 2025 budget announcement. Initiatives like Muft Bijli Yojana are driving significant adoption of solar energy. Over 6 lakhs plus solar installations in just nine months is indeed impressive. This remarkable growth highlights the increasing demand for clean energy solutions," says Shekhar Singal, Managing Director of Eastman Auto and Power Ltd.

The International Solar Alliance (ISA), spearheaded by India, has fostered international cooperation in solar energy deployment, attracting investments and sharing best practices. Decentralised solar projects, such as the KUSUM scheme for solar pumps and grids in rural areas, exemplify the role of targeted policies in addressing specific energy needs.

To achieve its renewable energy ambitions, India must adopt a multi-pronged approach.

"In addition, the government’s focus on enhancing Production Linked Incentive (PLI) schemes for solar component manufacturing is set to boost domestic manufacturing capabilities. This move will not only reduce India’s reliance on imported components, but also drive innovation, reduce costs, and make the sector more competitive globally in the current geopolitical context as well. The momentum in the solar industry shall ensure that the government’s target of 500 GW of non-fossil fuel capacity by 2030 is surpassed," says Mr. Shekhar Singal, Managing Director of Eastman Auto and Power Ltd.