India is the third largest energy consuming nation in the world. Rapid electrification in remote regions of the country in recent years has led to increased electricity consumption. In the last two decades, India was responsible for more than 10% of the increase in global energy demand. While countries around the world are prioritizing green solutions to combat climate change, India, too, is on the lookout for alternatives to reduce its dependence on fossil fuels and expand cleaner energy sources. A major coal crisis in October 2021, rising carbon emissions (India is the third largest emitter of greenhouse gases), increasing demand for energy have paved the way to explore green and renewable sources. Budget 2022 mirrors this aim of India and calls for a big push for renewable energy and distribution in power sector. The focus of the budget on Energy Transition and Climate Action will help the nation achieve its carbon emission targets promised during Conference of the Parties, or COP26 held in Glasgow last year.
Finance Minister Nirmala Sitharaman, in her budget speech announced major plans and allocations that help in the growth of renewable energy, energy transition, energy efficiency, grid connected energy storage, etc to boost the power and renewable energy sector of the country making it one of the important sectors to focus on in this budget. Let’s look at what budget 2022 has in store for this sector.
The Ministry of New and Renewable Energy headed by Mr. Raj Kumar Singh has been allocated a budget of ₹6900.68 crores in FY 2022-23 which saw a marginal increase compared to an allocation of ₹5753 crores in FY 2021-22. Production Linked Incentives (PLI) were announced to support the domestic manufacturing of solar panels for meeting the target of 280GW of installed capacity by the year 2030. The PLI scheme, which has a potential to create 60 lakh new jobs and additional production of 30 lakh crore jobs in the next five years, were pushed from ₹4500 crore in budget 2021 to an additional ₹19500 crore in this budget for high efficiency modules with priority to fully integrated units, signalling that India is betting big on solar power.
Source: Union Budget (indiabudget.gov.in) and The Weather Channel (weather.com)
Additionally, implementation of Ken Betwa Linking project was announced, which is estimated to cost around ₹44,605 crores. A budget of ₹1400 crore has been allocated for the same in the year 2022-23. The project is expected to provide irrigation benefits on an area of nine lakh hectares and drinking water to 62 lakh people while giving an opportunity to leverage 103MW hydropower and 27MW solar power generation capabilities.
The budget speech also stressed on bringing in battery swapping policy and formulation of interoperability standards. The private sector will be encouraged to develop sustainable and innovative business models for ‘Battery or Energy as a Service’ to improve efficiency in the EV ecosystem. Clean-tech and governance solutions, special mobility zones with zero fossil-fuel policy, and EV vehicles were also promised to promote a shift to use of public transport in urban areas. Enhanced financial support was also promised for setting up Distributed Renewable Energy projects in border villages under Vibrant Village Program.
The budget provides provisions to boost farmer’s income and address the issue of air pollution and stubble burning by enabling 5-7% co-firing of biomass pellets in coal-based thermal power plants. It is also inclined to encourage energy saving and efficiency in large commercial buildings. Four pilot projects will be set up to support coal-gasification and coal-to-chemical technologies.
A budget of ₹86,200.65 crores was allocated to the Ministry of Atomic Energy which appears to be an effort to combat carbon emissions. The budget allocation to Ministry of Coal has decreased from ₹933.60 crores in 2019 to ₹393.24 crores in 2022, hinting at a strong resolution of the government to reduce the nation’s dependency on coal.
Source: Union Budget (indiabudget.gov.in) and The Weather Channel (weather.com)
Source: Union Budget (indiabudget.gov.in) and The Weather Channel (weather.com)
The government is also in plans to issue Sovereign Green Bonds for mobilising resources for green infrastructure. The proceeds from green bonds will be deployed in public sector projects which help in reducing the carbon intensity of the economy. The green bonds are expected to lure investors to domestic the green bond market and create an opportunity of long-term financing for private sector players.
Power stocks witnessed a surge after the Union Budget speech on Tuesday, 01 February, 2022. A rally in shares of companies like Tata Power (2.3%), Adani Green (1.75%), Adani Transmission (1.5%) and Adani Power (1.6%) has led to an increase in BSE Power Index by 1%
The nation might indeed witness a boost in Power and Renewable Energy sector backed by the government’s plans and provisions facilitated for the same, paving way for India to phase out coal in coming decades and meeting its COP26 commitments of using clean energy technologies.
Author
Niharika Jayanthi
Editor, TJEF, TAPMI
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