Energy Transition and Climate Action To Guide India’s Amrit Kaal

Finance Minister Nirmala Sitharaman, on Tuesday, while presenting her fourth budget, said that this budget will steer the Indian economy for “India @ 100.” She added that India has now entered the Amrit Kaal, the 25 year-long lead up to the year 2047. According to her budget speech, among the key focus areas in this Amrit Kaal will be clean energy, energy transition, and climate action.

Solar, energy storage, battery and EVs have remained the key focus areas in this year’s budget to give a boost to India’s clean energy transition and take forward the action plan towards fulfilling those ambitious climate targets laid out by Prime Minister Narendra Modi at the COP26 Climate Summit in Glasgow last November.

Increased Allocation For Solar PLI Scheme and Emphasis on Energy Storage

Sanjeev Aggarwal, CEO Amplus Solar, said that the government has shown the intent and takes the vision of sustainability forward with this budget. “The government has now realised that to add an additional 300 GW of solar energy, we have to put in some other parts in the system as well, which includes manufacturing and emphasis on battery storage. The announcements this year has focused on these areas,” added Aggarwal.

Rajendra Shrivastava, President AES India, reiterated that the government has shown the intent to give a boost to its energy transition drive. “The political commitment of the country's leadership is very significant for any international investor. The leaders of this country, especially the Prime Minister, are committed to achieving realistic targets by the year 2030,” said Shrivastava.

Shrivastava also added that India is no more funding any polluting businesses, and that’s a big political message and commitment. “They are giving a roadmap for international investors to come to India,” said Shrivastava.

An additional Rs 19,500 crore have been earmarked for the PLI scheme in this year’s budget to boost solar manufacturing. This is over and above the allocation of Rs 4,500 crore in the last budget, bringing the total outlay to Rs 24,000 crore. To strengthen the storage ecosystem, grid-scale energy storage has now been included in the infrastructure sector which will enable access to finances for this sector. The moves are expected to give impetus to India’s efforts toward meeting net-zero targets by 2070, but industry leaders have cited some challenges as well.

“Different countries have different target years. We need a lot of investment to not only set up new energy plants but also to actually transmit the electricity. The whole ecosystem has to be such that the energy can be absorbed in the real-time. Hydrogen will definitely play an important role here as it can take a lot of methane combustion,” said Aggarwal.

Shrivastava on the other hand suggested to fix up the regulatory framework which hinders investors to invest. “The next focus should be to ensure that investors invest in India and the regulatory framework is fixed. The regulators are a bigger challenge, they should visualise themselves as a part of the solution and facilitate the growth of the market,” added Shrivastava.

Green Hydrogen Takes A Miss

A surprise miss from this year’s budget has been Green Hydrogen. A lot of announcements were expected in this year’s budget regarding Green Hydrogen because of Prime Minister’s announcement of the National Hydrogen Mission. The industry had expected allocations for viability gap funding, a cess on grey hydrogen (similar to coal cess), and optimisation of taxes and duties, as well as mandating green hydrogen for hard-to-abate sectors like steel, chemicals, and fertilizers.

Highlighting the challenges associated with Hydrogen, Aggarwal said, “Hydrogen is like 10 years away as the technology is still early to be done at scale. As of now it’s more like a national intention that we as a country are interested in transiting to green energy. India is also a market which is very price sensitive. As long as any technology is costlier than the alternate available to people, it is very difficult to sell.”

Shrivastava also stated challenges related to high costs and a lack of developed ecosystem around Hydrogen and said that at present, “It is a big boys’ game.”

“We have to earmark at least tens of millions of dollars in order to do projects of a meaningful size. Businesses like Reliance and Adani also require partnerships from the technology provider and innovators and these are the stakeholders which will fast track their plans,” added Shrivastava.

Battery Energy as a Service

One of the key challenges that have been cited for large scale adoption of EVs in recent times has been a lack of a developed charging infrastructure. The budget this year addressed to solve this challenge to some extent by recognising the constraint of space in urban areas for setting upcharging stations at scale. A battery swapping policy has been announced and inter-operability standards will be formulated. The private sector will be encouraged to develop sustainable and innovative business models for ‘Battery or Energy as a Service’.

DISCOMs Health In Focus

Considering the deteriorating financial health of DISCOMs, the budget has now allowed states a 4 per cent fiscal deficit to gross state domestic product ratio of which 50 basis points will continue to be reserved for power sector reforms. Smart meters have also got some concessional duties which will enable smoother revenue collection by them.

Some other sectors which took a miss in this year’s budget have been the Oil and Gas sector. The industry had put forward a long pending demand of bringing natural gas under the GST regime and to classify investments under it as green. Overall, the budget focused on strengthening areas under the renewable energy sector where India already has a strong foothold. It didn’t dive deep into diversification of India’s renewable energy mix and being the first budget after the historic summit in Glasgow, it has set the tone to make sincere efforts in achieving its climate commitements.

The Speakers were present at BW Businessworld’s Plan B Show to decode the announcements made by the finance minister in her budget speech.