Decoding India’s Evolving Renewable Energy Policies: What Investors Need to Know

April 16, 2025. By News Bureau

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articles

Megha Arora

INDUSLAW

Abhishek Rohatgi

Green energy transition

Renewable energy policy

National Action Plan on Climate Change

National Mission for Green India

Rooftop Solar Power Plants

PM Surya Ghar

India is steadily advancing towards achieving its ambitious goal of 500 GW domestic energy capacity from non-fossil fuel sources by 2030. As on January 2025, India’s non-fossil fuel-based energy capacity stands at 217.62 GW. This trajectory highlights India’s commitment to a greener and sustainable future, which is also evidenced by India’s early achievement of its first Nationally Determined Contributions (NDCs) – proposed under the Paris Agreement in 2015 – way ahead of schedule in 2019 itself. One of the key contributors to the achievement of these goals is timely policy interventions by the Government of India in promoting renewable energy initiatives and renewable energy investments.

It is crucial for potential investors to understand how the renewable energy policy landscape of in India is evolving to better align their long term and short-term goals.

Transition Towards Targeted Policies

One of the earliest definitive steps by the Government to combat climate change and promote renewable energy was the introduction of the National Action Plan on Climate Change (NAPCC) in 2008 which outlined the national strategy to address challenges associated with climate change. The NAPCC included 8 ‘National Missions’, including – the National Solar Mission, National Mission for Enhanced Energy Efficiency, and the National Mission for Green India. These missions established broad approach to sustainable development. However, in contrast to the earlier policies, the recent renewable energy policies have shifted towards a more targeted approach. For instance, unlike the earlier National Solar Mission – where the objective was to promote penetration of the solar energy technologies in general – we are now witnessing targeted policies like, PM Surya Ghar Muft Bijli Yojana – a policy specifically dedicated to promoting installation of rooftop solar power plants. This shift in the targeted policies signals a maturing policy regime.

Promotion of Market-Driven Mechanisms
Another key thematic shift in the renewable energy policies include deliberately moving towards market-driven mechanisms, particularly for matured initiatives. For instance, the PM-E Drive Scheme, unlike FAME-II, no longer provides any subsidies for 4-wheeler electric vehicles. Similarly, the tariff determination for wind energy moved from Feed in Tariff (FiT) Mechanism to competitive bidding route after 2017. This transition reflects the government’s recognition that certain segments of the renewable energy market have reached such level of maturity where market-driven forces would be able to drive demand.

Indigenisation of Clean Energy Solution

The Government is expected to continue pushing for indigenisation of renewable energy solutions with an aim to reduce import dependence and make the country self-sustainable in its pursuit of green energy transition. These indigenisation efforts are particularly reflected in policies like Approved List of Models and Manufacturers (ALMM), which mandates the use of domestically produced solar modules in utility scale projects. Recently, by an amendment in December 2024, the Government has further expanded the scope of ALMM to include solar cells. The Government’s indigenisation efforts are also reflected in terms of the various initiatives, such as – the Strategic Interventions for Green Hydrogen Transition (SIGHT) Scheme under the Gren Hydrogen Mission for supporting domestic manufacturing of electrolysers and the Production Linked Incentive (PLI) Scheme for advanced chemistry cell battery storage.

Promoting Next Generation Clean Energy Technologies
In the past few years, the Government, to make the country a leader in sustainable energy transition has come-up with policies to support the development of green-energy technologies which are still in an infancy stage. For instance, the NITI Aayog published a report outlining the broad policy interventions to support carbon capture, utilisation and storage (CCUS) technologies. India is supporting several pilot projects in the CCUS sector. Similarly, the government in the 2025-2026 Union Budget announced the launch of the Nuclear Energy Mission which would focus on the research and development of Small Nuclear Reactors.

Key Takeaways
India’s climate policies have a crucial role to play in its long-term energy transition and sustainable development strategies. Over the last few years, the Government of India has introduced several forward-looking green policies to combat climate change.

India has also witnessed greater focus on decentralised energy solutions, with focus on battery storage, pumped storage power, rooftop solar and rooftop aero turbine wind technologies. The combination of renewable energy sources and advanced solutions will create a stable, decentralised energy grid, reducing reliance on fossil fuels and enhancing energy security. The Nuclear Energy Mission is also a step in that direction. India has also seen a boom in the clean-tech start-up ecosystem and growth of EV infrastructure.

India's journey towards a sustainable and low-carbon future is marked by certain challenges that need to be addressed for effective implementation of energy transition strategies. For CCUS technologies to be viable, cost-effective carbon capture methods and robust safety protocols for carbon storage must be prioritised.

For large-scale EV adoption high initial costs, and dependence on imported lithium pose significant barriers. Additionally, nuclear expansion efforts are presently limited due to regulatory restrictions that limit private sector participation and patent regulations that stifle innovation in atomic energy operations.

Managing the demand side risks for new technologies is also critical. Further, the full potential of renewable energy sources in the country is significantly restricted due to the intermittent nature of such sources - which will have to be addressed by integrating energy storage solutions and promoting firm and dispatchable renewable energy. Further, energy from low carbon, non-intermittent sources like nuclear energy will have to be increased in the energy mix.

Following the US’s withdrawal from the Paris Agreement, international multilateral and bilateral debt funding for green energy initiatives in developing countries, such as India has become uncertain. The US withdrawal from the Paris Agreement was accompanied by several North-American banks, such as Bank of America, Citigroup, and Wells Fargo, exiting the Net-Zero Banking Alliance- an alliance for aligning the lending and investing activities of its members with net zero green-house gas emissions. These withdrawals are expected to make the funding of green climate initiatives more challenging.

Amid these policy shifts in the international climate scene, India’s domestic energy policies gain significant importance in sustaining the momentum in the green energy transition of the country.

- Megha Arora, Partner, IndusLaw; Abhishek Rohatgi, Associate, IndusLaw