The upcoming Union Budget 2024 is poised to make significant strides in the renewable power sector, with an expected allocation of double-digit capital expenditure. This allocation is part of a strategic push to enhance the sector’s capacity to 180 gigawatts by the fiscal year 2026, as highlighted in a recent CRISIL report. The report underscores a strong emphasis on solar energy, projecting that a substantial pipeline of 75 gigawatts will be added by the end of fiscal year 2026.

This growth trajectory is further bolstered by various schemes aimed at promoting rooftop solar installations and favourable policy changes within the sector. For instance, the rooftop solar scheme, with an outlay of Rs 75,000 crore, aims to bring solar rooftops to 10 million households. The launch of the online portal, PM Surya Ghar, is expected to streamline the approval and implementation process, facilitating faster adoption of solar energy.

However, alongside these positive developments, the sector faces certain challenges. The report identifies relatively high tariffs for storage-linked capacities as a potential obstacle to increased adoption of renewable energy. As of April 2024, nearly 65% of auctioned capacity remains without power supply agreements, with tariffs for these projects higher compared to pure solar or wind projects. These projects store power at the time of generation and discharge it later when needed, necessitating a comparison of their tariffs with those of thermal projects, which can supply power continuously and meet demand.

Additionally, the report highlights the critical need for substantial capital investment, estimated at around Rs 3 trillion over the next two years. Monitoring of debt levels and equity raises will be essential for managing the sector’s growth sustainably. The report also emphasises the importance of timely development of storage infrastructure to manage the intermittent and uncontrollable nature of renewable energy generation, further underlining the complexities and nuances involved in ensuring the sector’s robust and sustainable growth.