Budgeting for Net Zero

The Government of India has set ambitious goals to ramp up a range of clean technologies by 2030 to increase energy independence, security, and access while promoting industrial development and reducing air pollution and GHG emissions. To deliver on these goals, the government has introduced a suite of financial and non-financial support measures. But will these measures be sufficient to reach the goals in full and on time?

This report aims to answer that question for five technologies: three in the power sector (battery energy storage systems [BESSs], offshore wind, and solar photovoltaic [PV]); one in transport (electric vehicles [EVs]); and one in industrial technology (green hydrogen [GH2]).

The report estimates the cost gap to achieve India's 2030 clean energy targets for each clean energy technology. The gap identifies by how much the cost of a specific clean technology must drop to reach cost parity with conventional technologies (such as thermal power and internal combustion engine vehicles) to meet the stated clean energy goals for each technology.

Key findings of this report include:

• Government support has been vital for the rise of renewable energy in India and has allowed three of the five key technologies—BESSs, solar PV, and EVs—to either already reach cost parity with their conventional equivalent or to do so in the next decade.
• Government support for clean energy goals can have several co-benefits: it can drive economic growth, create jobs, and increase public revenue while reducing GHG emissions and air pollution.
• Existing Central Government subsidies (provided and announced) were found to be sufficient to fully cover the cost gap for solar PV and BESSs. No additional direct financial support is required, but regulatory reforms and accelerated auctions are essential to maintain momentum.
• Offshore wind and GH2 face the largest cost gaps due to their nascent status and ambitious targets. To tap into India's 71 GW of offshore wind potential, additional government support of at least ~INR 9,000 crore per GW (~USD 1.08 billion per GW) will be needed in the short term.
• For GH2, current government funding covers only ~5% of the cost gap and will be exhausted before 2030, requiring a second tranche to continue even at this minimal level of support. Overall, for the government to bridge the full cost gap for GH2 between 2024 and 2030, nearly 0.96% of the GDP would be required.
• Central and state governments do not need to fund the full cost gap, however, because small public investments can catalyze larger private sector contributions. Other policy tools such as renewable purchase obligations and fossil fuel taxation reforms can direct investment toward clean technologies.
• International climate finance will be essential, especially for technologies like offshore wind and GH2, which have high viability gaps.
• Investing now in clean energy technologies, even for high-cost sectors, can have positive co-benefits and ensure India's global competitiveness and long-term economic and environmental resilience.