Union Budget 2026 expectations: The green energy moment India can’t miss

Union Budget: India stands at a crossroads where the Union Budget 2026 can decisively accelerate its journey towards a sustainable, green energy future. Budgets in India are not just a fiscal event; but an opportunity for India to reaffirm its dedication to sustainable development and climate action. The stakes are high as the world grapples with geopolitical and energy security challenges. India, as one of the fastest-growing economies, is expected to play a pivotal role in the global energy transition.

The Imperative for Green Energy in India

The energy sector is at the heart of India’s economic growth and environmental future. Traditional fossil fuel reliance has brought challenges—environmental pollution, energy insecurity, and volatile import bills. The transition toward renewables offers multiple benefits: cleaner air, reduced carbon footprint, enhanced energy self-reliance, and the emergence of new industries and job opportunities.

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India’s energy landscape is undergoing a transformative shift. The country has set ambitious targets for renewable energy, with a goal to achieve 500 GW of non-fossil fuel capacity by 2030 and to become net-zero by 2070. This transition is essential to enhance energy security, create jobs, and drive inclusive economic growth. Achieving these goals requires more than policy declarations; it demands a robust and visionary budget that empowers innovation, investment, and inclusive growth in the green energy sector.

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Expectations from the Union Budget 2026

Enhanced fiscal incentives for renewable energy

One of the most critical areas where the budget can make an impact is through fiscal incentives. Industry stakeholders expect the government to increase allocations for renewable energy projects, including nuclear, solar, wind, biomass, and hydropower. This could include enhanced viability gap funding, production-linked incentives, and accelerated depreciation benefits for green energy assets. Simplifying the taxation regime for renewables and providing tax holidays for new projects can further stimulate private sector participation.

Expansion of green hydrogen initiatives

Green hydrogen is rapidly emerging as a game-changer in India’s energy transition. Allocating dedicated funds for green hydrogen research, pilot projects, and infrastructure development will be crucial. In addition, the budget could incentivise companies to invest in electrolyzer manufacturing and facilitate collaborations between public and private sectors to build a robust hydrogen ecosystem.

Accelerating grid modernisation and energy storage

The integration of renewable energy into the national grid requires substantial upgrades in grid infrastructure and energy storage capacities. The budget must prioritise investments in smart grids, flexible transmission networks, and battery storage solutions. Support for pumped hydro storage projects and incentives for distributed energy storage can help manage grid variability and ensure reliable supply. Strengthening the distribution network, especially in remote and rural areas, will be key to making green energy accessible to all.

Incorporating demand response mechanisms and better forecasting tools will further enhance grid integration of intermittent renewable sources like solar and wind.

Support for decentralised energy solutions

Decentralised solar and wind projects, such as rooftop solar and microgrids, have tremendous potential to democratise access to clean energy. The budget could introduce special schemes for residential, commercial, and rural users to adopt decentralised solutions. This may include increased subsidies, low-interest loans, and simplified regulatory processes for small-scale renewables. Promoting community-based energy models will empower local populations and contribute to rural development.

Incentivising electric mobility and clean transportation

The transport sector is a significant contributor to India’s carbon emissions. The budget must expand support for electric vehicles (EVs) by providing higher subsidies, investing in charging infrastructure, and encouraging domestic manufacturing of EV components. Incentives for research into alternative fuels such as biofuels and green hydrogen for transportation will accelerate the shift toward cleaner mobility solutions.

Promoting green financing and climate investments

The scale of capital required for energy transition is massive and cannot be met solely by government or traditional lenders. Mobilising private capital through sustainable finance mechanisms is critical. The budget should encourage green bonds, carbon markets, and ESG-linked loans by providing fiscal incentives such as preferential tax treatments and quicker regulatory clearances for ESG-compliant funds.

Additionally, introducing climate risk disclosure mandates for companies and financial institutions can enhance market transparency and redirect investments toward sustainable projects. I also advocate risk mitigation tools — like credit guarantees and viability gap funding — within the budget to make renewable energy projects more bankable.

Circular economy initiatives

Integrating circular economy principles into the energy ecosystem by incentivising recycling of solar panels, batteries, and other equipment will help minimise environmental impacts and resource wastage. This approach offers long-term sustainability that complements renewable energy adoption.

Fostering research, innovation, and skill development

To keep pace with global advancements, India must invest in research and innovation in green energy technologies. The budget could allocate funds for R&D centers, technology incubators, and academic collaborations focused on renewables, energy storage, and clean fuels. Additionally, developing skill-building programs and vocational training for the renewable energy workforce will ensure that India has the human capital needed to sustain its energy transition.

Addressing climate resilience and just transition

As we move toward cleaner energy, it is imperative to ensure a just transition for communities dependent on traditional energy sectors. The budget should include provisions for reskilling workers, supporting affected regions, and investing in climate resilience measures. Special funds for disaster mitigation, adaptation, and sustainable livelihoods for vulnerable populations will reinforce India’s commitment to inclusive growth.

Charting a sustainable future

The Union Budget 2026 can be a defining moment for India’s green energy ambitions. It must transcend traditional fiscal measures and craft an innovative, integrative approach that embeds sustainability across economic, social, and environmental dimensions.

By enhancing financial incentives, investing in infrastructure, fostering innovation, promoting sustainable finance, and ensuring inclusive energy access, the budget can energise India’s transition to a low-carbon economy. Such a budget would not only align with India’s climate commitments but also unlock unprecedented opportunities for economic growth, job creation, and global leadership in clean energy.

(The author is Partner and Leader, Climate and Energy, PwC India)