Budget 2023: Experts expect a boost to decarbonisation, energy transition

Issues that need to be addressed include expanding funding for renewable manufacturing, extending PLI to wind and green hydrogen, among others

Union Budget 2023 is expected to highlight India's ability to continue expanding its decarbonisation initiative despite concerns about energy security amid the war in Europe and the IMF's recession prediction.

Whether it is the recently approved Green Hydrogen Mission, the push towards electric vehicles (EVs), or increasing investments in renewables, experts say India’s energy transition is gathering pace.

India is committed to achieving a series of announcements made globally, such as reaching 500 Gw (gigawatt) non-fossil energy capacity by 2030, and 50 per cent of its energy requirements from renewable energy by 2030, among others. The experts expect the Union Budget 2023 to provide sufficient financial backing and strategies for the country’s commitments and ambitions in the following ways:

Mainstreaming green growth by generation-based initiatives

According to Binit Das, Deputy Programme Manager, Renewable Energy, Centre for Science and Environment, there is limited financing for renewable energy manufacturing in the country which the budget is expected to address. He asserted that the government's push towards mainstreaming green growth needs to be backed by generation-based initiatives including building an ecosystem. Das said, "Last year, solar rooftops saw limited growth due to a lack of impetus in the key green energy tech sector. High-interest rates in India make green power costlier, affecting overall commercial viability and cost parity with fossil fuel power. It is expected that the Budget 2023 will address these issues and enhance mainstreaming of green growth. The need for energy security has never been more urgent."

Das said that from a policy standpoint, production-linked incentive (PLI) schemes are available for organisations that manufacture high-efficiency solar PV (Photovoltaic) modules but not for entities operating in wind or green hydrogen/ammonia sector. This is expected to be addressed in the budget.

Clarity on taxes and subsidies

Experts say India has a handful of organisations in the renewable energy sector. Therefore, the focus should be on robust policy, a stable tax regime, and fiscal incentives to attract investments in this space. Das said, "For developers, there is a lot of burden, which is currently the biggest challenge that the renewable energy sector faces in terms of solar and wind technology."

Highlighting the need for tax incentives, Das said the current concessional tax regime of 15 per cent which is available to organisations commencing the generation of electricity or manufacture/production of any article or thing before March 31, 2024 should be extended to encourage organisations to invest in new energy. He emphasised that the Budget 2023 is expected to provide clarity on taxes and subsidies for the renewable energy sector.

More funds for PLI Scheme to boost domestic solar manufacturing capacity

"The government is giving generation-based incentives which refer to the incentives given to consumers for generating power using solar technology. For example, if you generate a few kilowatts from your rooftop, the Discom will give an incentive of some paise per kilowatt/hour. These incentives are important for encouraging people to adopt solar. The Delhi solar policy talks about this but we need PLIC schemes around solar generation for the nation as well," said Das.

Jatinder Pal Singh, Founder of J.P. Consultants works on Solar Plants and Energy Savings highlighted that the budget is expected to announce initiatives for pushing solar in the domestic segment.

He said, "PLI schemes currently have an allocation of Rs 19,500 cr for Solar Manufacturing needs to be provided with more funds as the domestic capacity of solar manufacturing needs to be enhanced a lot. With lesser domestic capacity, pricing is very unstable and projects are affected economically."

Transmission system for integration of wind power
 

Martand Shardul, Policy Director, Global Wind Energy Council India – GWEC India said, " We are expecting increased allocation and big announcements for the wind energy sector. It is because,  earlier this month, the Ministry of New and Renewable Energy (MNRE) notified its decision to organise an annual tender for 8 GW onshore wind projects across 8 windy states every year in this decade."

He added that the government has set a target of harnessing 30 GW offshore wind capacity off the coast in Gujarat and Tamil Nadu. Apart from this, in November 2022, the government notified a draft sea-bed lease tender for offshore wind, and in July 2022, the MNRE released a 37 GW offshore wind tender trajectory.

PLIs and demand aggregation exercise for green hydrogen

Green hydrogen is more expensive than grey hydrogen which is derived from fossil fuels. Yet, it is important to spur green hydrogen generation and demand for it as it is environmentally friendly and a vital for the country's clean energy transition. The recent announcement by the government under the Hydrogen mission is a positive step in this direction and envisages India's ability to attract investments worth approximately $100 billion by 2030. It is expected that Budget 2023 will make some important announcements regarding PLIs and demand aggregation for the green hydrogen ecosystem.