Budget 2025: Renewable Energy sector may get higher allocation, manufacturing incentives and more

The Union Budget 2025-26, to be presented on February 1, is likely to bring several incentives for the renewable energy sector as India focuses on achieving 500 GW of green energy capacity by 2030.

The renewable energy industry expects Finance Minister Nirmala Sitharaman to announce further measures to boost local equipment manufacturing, sops for green technology adoption, higher allocation for renewables, and duty differential to support domestic players.

The renewable energy sector has seen more than double the budgetary support in the last two years. The total allocation for the Ministry of New and Renewable Energy (MNRE) increased to ₹19,100 crore for FY 2024-25 compared to the revised budget estimate of ₹7,848 crore for FY 2023-24.

Incentivising battery storage production

The industry expects a push to battery storage, which is vital in ensuring stable power supply and integration of green energy.

Industry players seek measures to address execution challenges and incentivise local manufacturing in new and emerging technology spaces within renewables. The government may announce support measures for the local battery supply chain and manufacturing to cut import dependence, mainly from China.

Measures to boost private-PSU partnerships

More measures are expected to boost the participation of private and Public Sector Undertakings (PSUs) in the green energy transition to achieve the 2030 target and Net Zero status by 2070. A major increase in resource allocation for renewable energy adoption, green technology integration, and waste reduction is expected, as such technologies require high capital costs and a long-term horizon of around 10-15 years.

Incentives for manufacturing solar cells

Green energy sector observers hope the Union Budget 2025 will include more sops to boost local manufacturing of solar cells and green hydrogen. Supporting measures may be announced to attract foreign funding and boost research and development (R&D) activities in the sector.

Higher allocations for offshore wind and large solar projects

Offshore wind and big solar projects are likely to get higher budgetary allocations as the country looks to diversify the renewable energy portfolio. Similarly, higher allocation for emerging technologies, carbon markets and green hydrogen production is expected.

Support measures for critical minerals

The government may focus on critical minerals such as lithium, copper, cobalt, and rare earth materials, which are vital for sectors like nuclear energy, renewable energy, space, defence, telecommunications, and high-tech electronics.

In the last budget, the government fully exempted customs duties on 25 critical minerals and reduced basic customs duties (BCD) on two of them to boost the processing and refining of such minerals. Any further friendly measures in this direction will ensure the easy availability of such critical minerals for renewable energy players.

Boost to green energy adoption

The government, in the last Budget, announced policy measures like the PM Surya Ghar Muft Bijli Yojana to boost the adoption of green energy by the masses. The Yojana was launched to set up rooftop solar plants to enable 1 crore households to obtain free electricity up to 300 units every month.

The renewable energy sector saw a significant improvement in energy capacity addition last year. A total of 27 GW of renewable energy capacity was added during calendar year 2024. The total installed non-fossil fuel capacity was 214 GW in November 2024, an increase of 14% compared to 187.05 GW in the same period last year. Of this, solar energy capacity was 94.17 GW and wind energy capacity stood at 47.96 GW.

Leading renewable energy stocks have remained under pressure ahead of the Union Budget 2025. Shares of leading players in the industry, like Waaree Energies, KPI Green Energy, NTPC Green and Adani Green Energy, among others, have declined up to 60% since the beginning of the month compared to their closing price on the NSE on January 1.