INDIA HAS ENTERED a new phase with the new NDA government. The past ten years under NDA’s leadership have witnessed remarkable achievements in clean energy, positioning India as a global leader. As the FY25 Budget is imminent, itis an appropriate time to explore the potential of the clean energy sector in India with a fresh lens, while remaining focused on implementing current initiatives and targets.
India, now a $3.5-trillion economy, is on track to reach $8 trillion by 2030. Clean energy could contribute 5% of this GDP, becoming a major growth driver equivalent to sectors like chemicals and steel. This potential, worth $350-400 billion annually, is time-sensitive, as the global race for clean energy dominance intensifies.
Currently, clean energy constitutes 1.5-2% of India's GDP. Achieving the ambitious $400 billion annual target necessitates a fivefold increase, attainable through a dual approach. First, doubling domestic renewable energy deployment and bolstering transmission infrastructure is crucial. The remaining growth can be driven by scaling investments in five key areas: Expanding manufacturing across the clean energy supply chain, developing robust energy storage solutions, promoting the export of renewable energy components and services, accelerating green hydrogen output and consumption, and jumpstarting the carbon market and circular economy. This comprehensive strategy will propel India’s clean energy sector to new heights, contributing significantly to the economic growth and environmental sustainability. India has strong foundations, with ambitious targets and initiatives like the PM-Surya Ghar Mutft Bijli Yojana. However, to compete with nations like China that have a significant head start, a three-pronged approach is needed:
Scaling domestic targets: India’s rapidly growing energy demand necessitates a re-evaluation of our renewable energy targets. Even with the current 500 GW target by 2030, we will not be able to fully meet the increasing electricity needs, India, now a $3.5-trillion economy, is on track to reach $8 trillion by 2030. Clean energy could contribute 5% of this GDP. This potential, worth $350-400 billion annually, is time-sensitive, as the global race for clean energy dominance intensifies especially during periods without solar power. Therefore, scaling up this target by 25-30% is crucial, alongside a similar target for energy storage to ensure grid stability. This approach offers significant benefits. It opens the possibility for Indiato become a net exporter of clean energy, reducing our reliance on imports. Moreover, ambitious targets would attract substantial investments in the domestic manufacturing ecosystem for renewable energy technologies, particularly in energy storage. This would stimulate economic growth, create jobs, and strengthen energy security.
Formulating a green industrial policy: Industrial policies, back in vogue as recent IMF papers indicate, are targeted interventions used by governments to boost domestic producers or promote growth in selected industries. Major players in clean energy like China, the US, and the EU have announced such policies. India has implemented targeted interventions mainly through performance-linked incentives and non-tariff barriers. To be competitive across the value chain, we need a broader approach. Steps should encompass support for a fuller mix of technologies, including turbines and blades for on/offshore wind, energy efficiency technologies like super-efficient appliances, and carbon capture technologies. It should cover as many parts of the supply chains as needed. We also need a well-considered suite of trade and investment incentives and restrictions to leverage friend-shoring opportunities and nurture our industry, similar to countries like the US and the EU imposing tariffs on electric vehicles and components imported from China. India can potentially supply up to 20% of global carbon offsets, creating a $20 billion annual export opportunity. We must proactively and strategically leverage Article 6.2 of the Paris Agreement to achieve this.
Leveraging a fuller range of diplomatic tools: India’s geopolitical allies can become major clean energy export markets. Cultivating these ties through bilateral diplomacy, participation in regional and multilateral fora like ASEAN and the G20, and alliances like the International Solar Alliance is crucial. An additional tool could be utilising the financial and operational strengths of public and private companies to invest in these markets, becoming suppliers to other regions, and overcoming trade barriers, particularly for emerging sectors like green hydrogen. India must act decisively to transform its clean energy potential into an economic and geopolitical asset. This requires a strategic approach that combines ambitious domestic targets, a comprehensive industrial policy, and effective diplomatic engagement.