With the Union Budget fast approaching, experts expect continued budgetary support for India's renewable energy sector as the government is expected to maintain emphasis on local manufacturing and incentivising clean energy infrastructure.
In the renewable space, market experts are keenly watching for measures to boost growth, address execution challenges, and incentivise local manufacturing in new and emerging spaces within renewables, which is still in its early stages.
Incidentally, the Indian government has an ambitious renewable energy target of achieving 500 GW from non-fossil sources by 2030.
The Ministry of New and Renewable Energy (MNRE) allocated around Rs 19,100 crore in 2024-25 -- a 143 percent increase over the revised estimate of the previous fiscal. While the largest allocation – around 45 percent -- was towards solar power grids, the PM Surya Ghar Muft Bijli Yojana, which was approved in February 2024, saw the second-highest funding allocation of around 33 percent.
Meanwhile, battery storage, which is a critical component for renewable integration, could see some announcements, say experts.
“The government is planning to foster a local battery supply chain and avoid over-reliance on China. While there’s already a production-linked incentive (PLI) for batteries, more duty support is expected to incentivize local manufacturing. However, raising duties could make batteries more expensive, so a delicate balance is needed,” said Satyadeep Jain of Ambit.
Rupesh Sankhe of Elara noted that the total allocation for renewables has doubled over the past two years. This year also, he expects continued higher budgetary allocation. "These are long-term technologies, not one- or two-year technologies. It’s almost a 10-15-year horizon, and with high capital costs, expertise is necessary. So, the government has to allocate more to encourage private and PSU participation," said Sankhe adding that the government has been pushing for smart metering and distribution efficiency.
"The revamped distribution scheme announced in 2021 aims for smart metering, and out of 25 crore meters, 12 crore are already sanctioned, and installations have begun. The remaining 13 crore meters will also see tenders and installations in the coming years," he said.
Sankhe also highlighted the need for green bonds to support financing, saying, “Given the high capital requirements for capacity addition and infrastructure investment, green bonds could play a vital role. The government might also expand initiatives like rooftop solar, which saw a strong response last year.”
Meanwhile, Vinit Bolinjkar of Ventura Securities is of the view that since the renewable energy space remains a key beneficiary of long-term government policy, the upcoming budget may introduce more measures to strengthen this sector, and the ongoing shift toward cleaner energy will likely accelerate in the years ahead.
Challenges and solutions
Like other capex-based sectors, execution has been a persistent issue in the sector. “Year-to-date, 14-15 gigawatts of renewable energy were installed, including 12 gigawatts of solar,” Jain noted. “Even with a typical increase in the fourth quarter, installations are likely to remain in the 20-25 GW range for FY25. Land acquisition and transmission remain significant constraints, along with delays in equipment procurement and PPA signings by DISCOMs,” he added.
On execution challenges, Ventura Securities' Vinit Bojinkar added that while there has been development in new areas, the execution challenge has been about getting the cost economics right. For example, Bojinkar highlighted that India is the first country in the world to develop a hydrogen locomotive engine with a 1200 HP power capacity.
"The fact that India has developed 1200 HP power engines to be run by hydrogen, with railways as a major consumer, is a promising sign," says Bojinkar adding that this development is expected to boost investment in hydrogen production.
"It can trigger increased demand and lead to more allocations toward hydrogen production. The industry will take it more seriously, and we should see traction around FY27," he says.
Stocks to Watch
The sector’s growth potential is reflected in stock market trends such as growing investment in storage and pump storage projects which will help the government in their green energy mission.
Bolinjkar added that he sees opportunities within Adani Green Energy and NTPC. "While NTPC looks good, NTPC Green still needs to acquire land, and a lot of projects need to take off the ground. NTPC Green can see a lot of corrections, but NTPC Limited is a very good buy at the current level," he added.
On market correction in the space, experts note that there has been a healthy correction, making some stocks attractive. "However, pockets like solar cell manufacturing remain stretched due to potential oversupply,” Jain added.
Sankhe added that the focus will remain on the government’s commitment to the green transition and renewable energy technologies. "Government expenditure is largely directed to roads, highways, defense, and railways, with power primarily driven by companies," he said. "But as the green transition continues and government policy supports investment, renewable energy companies and financing entities like PFC and REC will be in focus."
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