Budget 2026 for renewable energy: Designing the next decade of clean energy - what FM needs to do

By Raju KumarIndia’s clean energy transition is entering a phase where outcomes will be shaped as much by system design as by ambition. Over the past decade, renewable energy capacity has expanded at an unprecedented pace. The next chapter, however, will demand more than scale alone. It will require sharper focus on system readiness, financial stability, and policy credibility. As India advances towards its targets of 500 GW of non-fossil fuel capacity by 2030 and net-zero emissions by 2070, Budget 2026 presents an important opportunity to align fiscal policy with the realities of a rapidly evolving energy landscape.Over the past decade, policy reforms, competitive bidding mechanisms, and targeted fiscal support has allowed India to swiftly expand its renewable capacity. With this solid foundation established, the focus is now shifting toward strengthening the supporting ecosystem. One issue that has clearly moved to the forefront is energy storage. With increasing integration of renewable sources, the challenge has shifted from generation alone to the effective storage and reliable delivery of power. Battery Energy Storage Systems (BESS) are increasingly recognised as essential infrastructure rather than optional additions. Storage installations are expected to rise sharply, but this growth will depend on clearer regulatory frameworks, rationalisation of charges and levies, and a tax regime that improves bankability. In parallel, pumped storage projects are regaining relevance as a solution for long-duration storage, enabling utilisation of surplus green energy during non-solar hours — provided approval processes and financing pathways are streamlined.Grid modernisation and distribution reform remain equally critical. Recent policy developments reflect progress, evidenced from Indian DISCOMs returning to profitability in FY 2024-25 after years of losses, supported by improved cost recovery and lower aggregate technical and commercial (AT&C) losses. However, performance remains uneven across states. New policy initiatives also encourage greater private participation in distribution to enhance efficiency and service quality. Budget 2026 can consolidate these gains through outcome-linked support for smart meters, rooftop solar, payment security reforms, faster execution of inter-state transmission projects and sustained investment in new corridors to bring more tangibility to the reforms.Another area where expectations are steadily building is green hydrogen. The National Green Hydrogen Mission has established a clear direction, but scaling the ecosystem will require continued support across production, storage, transportation, and end-use adoption. Policy continuity and clarity particularly around incentives in Budget 2026 will be critical to attracting long-term capital. There is also scope to strengthen India’s export positioning through international partnerships, provided domestic frameworks reflect stability and global competitiveness.Manufacturing is becoming a key pillar of India’s energy transition, necessitating ongoing fiscal and policy support. Alongside renewables, India is developing small modular nuclear reactors linked to hydrogen production, signalling a diversification of clean energy technologies. Expanding domestic manufacturing of solar modules, cells, batteries, and electrolysers can align clean energy goals with industrial priorities and reduce import dependence. Continued support for rooftop solar, including potential expansion of PM Surya Ghar (Muft Bijli Yojana), can enhance decentralized generation and consumer participation. Bioenergy and compressed biogas also deserve attention for their roles in waste management, rural incomes, and energy security. It will be interesting to see how Budget 2026 reflects this priority through capital outlay commitments.As the clean energy ecosystem deepens, policy certainty – reinforced through Budget measures on taxation, indirect levies, and exit structures – will remain critical to sustaining long-term investment. Proposals to strengthen climate-finance frameworks, including dedicated green financing platforms, could support capital formation across renewables, electric mobility, and climate technologies.Tax policy will remain a critical lever across these areas. Expectations from Budget 2026 include further rationalisation of GST for renewable energy equipment and services, import duty rationalisation and calibrated customs duties for critical inputs. Targeted measures such as accelerated depreciation for clean energy assets could materially improve project economics, particularly for storage and other capital-intensive technologies.Ultimately, the success of Budget 2026 will depend on whether it reinforces confidence that India’s energy transition is not only ambitious but also bankable and sustainable. Clear and predictable domestic policies will be key to supporting international partnerships and enhancing India’s clean energy export potential as well as conveying a clear vision for sustainable growth. The transition is underway; the task now is to ensure the foundations are robust enough to sustain it.(Raju Kumar is Partner and Energy Tax Leader, EY India)