Need for a strong policy focus on renewables in the 2022 budget
The government’s policy focus on renewables remains strong, in light of the Prime Minister’s announcement of plans to increase non-fossil fuel based capacity to 500 GW by 2030. India also aims to meet 50% of its energy needs from renewables by 2030. This in itself implies an annual addition of 42 GW of renewable capacity over the next eight years. It also involves a large investment potential of around Rs 20-22 lakh crore and an additional investment of around Rs 12-15 lakh crore to increase the transmission network as well as storage capacity.
Given the strong pipeline of projects through the central intermediary, the Solar Energy Corporation of India (SECI), and state nodal agencies, around 55 GW of the projects remain under implementation and have good visibility of the addition of renewable capacity over the next 2 to 3 years. -year. The superior price competitiveness of renewables for buyers, both in the utility and commercial and industrial (C&I) segments, as well as sustainability initiatives for renewable energy adoption remain the fundamental and structural driver of demand for investments in this area in the future.
Therefore, incentives and policy measures are needed to promote investments in the energy storage segment (either in the form of battery storage or pumped storage).
The weak financial profile of distribution utilities remains a major concern for the entire power sector value chain. Achieving a sustainable financial recovery of public distribution companies remains essential to achieve the renewable energy capacity targets announced by the government. This would require public distribution companies to focus proactively on improving operational efficiency and on being able to pass on cost changes through tariffs to consumers in a timely manner.
Accordingly, a continued focus on measures to accelerate the implementation of various reforms in the distribution segment is expected, with a higher budget allocation for strengthening the distribution network under the reform-based program. and linked to the results announced in the last budget. In addition, an increase in budget allocation is provided for strengthening transmission infrastructure (both intra-state and inter-state), increasing electricity to regions with high renewable generation potential. .
With a strong policy focus on renewables and the transmission and distribution network, fiscal measures should provide additional impetus to support renewable energy investment needs and foster the availability of long-term financing pathways.