Budget 2025: Will Sitharaman ignite a green revolution in clean energy?

India Budget 2025: Climate change and human progress are intertwined, with energy serving as the critical link. Countries need energy not just to sustain their populations but also to fuel development and improve quality of life. However, this relentless pursuit of progress has led to the burning of fossil fuels, which accounts for 75% of global greenhouse gas emissions, as per a UN report. As the world grapples with this challenge, the spotlight turns to renewable energy as the key to sustainability.

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The upcoming Union Budget 2025 has the potential to catalyse India’s clean energy transition. Experts believe this is a critical moment to focus on renewable energy investments, carbon market development, and improved energy efficiency.

Budget 2025: The perfect time to act

Experts have emphasized the need for policy focus. "For emerging technologies like green hydrogen, fostering a supportive ecosystem is critical. Further, creating demand is key, as the sector is price sensitive," Rahul Prithiani, Senior Director & Global Head of Energy and Sustainability at Crisil Intelligence, says. He highlights that the power sector—which will drive nearly 60% of investments—is pivotal to this transition.

India, which aspires to become a developed nation by 2047, requires substantial energy resources. The country’s commitment to renewable energy is evident in its Panchamrit pledge announced at COP26 in 2021. This includes goals such as creating 500 GW of non-fossil energy capacity by 2030, meeting 50% of its energy needs through renewables, and achieving net-zero emissions by 2070.

The renewable energy sector anticipates bold measures in this year’s budget. Piyush Goyal, Co-Founder & CEO of Volks Energie, suggests, "This year’s budget could be a watershed moment for India’s renewable energy sector. We expect incentives for technological breakthroughs and provisions for large-scale solar and wind energy investments."

Energy storage solutions also demand urgent attention. Debi Prasad Dash, President of the India Energy Storage Alliance (IESA), highlights the need to accelerate battery energy storage systems by 2025. "The government must encourage investment in storage capacity to meet peak electricity demand," Dash said. Goyal added, "Subsidies and tax rebates for Battery Energy Storage Systems (BESS) are essential to stabilise the grid. Incentives for advanced battery technologies like LFP and Ni-Cd should also be introduced."

India’s renewables pivot
India has made significant strides in the renewable energy sector. Finance Minister Nirmala Sitharaman’s last budget allocated Rs 19,100 crore to the Ministry of New and Renewable Energy (MNRE), marking a 143% increase from the previous year’s revised estimate. A substantial portion of this budget supported initiatives like the PM Surya Muft Bijli Yojana, which promotes rooftop solar panels.

India’s total renewable energy capacity has reached 203.18 GW as of October 2024, reflecting a 13.5% annual growth. Solar power leads with 92.12 GW, followed by wind energy at 47.72 GW and hydroelectric power at 52 GW. Analysts predict that India’s renewable energy growth rates will surpass China’s by the latter half of this decade. BloombergNEF estimates that India’s power sector is on track to install 506 GW of clean energy by 2030.

Need of the hour: Investment and policies
EY India estimates that India will need $150-200 billion annually to fund its energy transition. Policies such as green bonds, green taxonomy, and disclosure requirements under securities laws will play a critical role in mobilising these investments. In her previous budget, Sitharaman also emphasised developing India’s green taxonomy for climate finance, enabling businesses to raise funds efficiently.

Major clean energy sectors have seen significant investment growth. Solar rooftop projects raised over $2 billion, while wind energy companies like Inox Wind and Suzlon Energy secured notable equity funding. Green hydrogen and electric vehicles (EVs) have also attracted substantial investments.

If India aims to lead the global renewable energy transition, the Union Budget 2025 must prioritise green energy initiatives. Robust policy measures and significant investments are essential to sustaining the momentum. The expectations are high as Finance Minister Nirmala Sitharaman prepares to present a budget that could ignite a green revolution in India’s clean energy sector. This would not only strengthen India’s energy ecosystem but also position the nation as a global leader in sustainability and innovation.