Is Budget 2025-26 the Dawn of India’s Alternative Clean Energy Boom?

The Union Budget for 2025-26 underscores India's intensified commitment to diversifying its renewable energy portfolio beyond traditional solar power, with significant allocations aimed at emerging clean energy sectors such as green hydrogen and biogas. 

This year, the budget focused more on nuclear energy and domestic critical mineral production over traditional renewable sources. Indeed, Solar power remains a constant in India’s clean energy strategy. Yet, Nuclear power, Biogas, and Green Hydrogen made the headlines. Further, domestic manufacturing was also a major point of focus with the announcement of the National Manufacturing Mission to boost domestic production of solar PV cells, EV batteries, wind turbines and grid-scale batteries.

The latest development can be seen as a balancing act as India treads on a fine line toward a sustainable future. The immediate reason for this novel approach of diversification, especially toward nuclear power, is being portrayed as a solution to India’s baseload power requirement, given the intermittent nature of solar and wind energy.  

Increased Focus on Alternative Energy Sources

With a huge sum of INR 26,549 crore allocated for the Ministry of New and Renewable Energy (MNRE), India has maintained its strong push for clean energy in line with its 2030 RE targets. The latest allocation is an over 53 percent increase compared to the previous budget of INR 17,298 crore. 

A significant portion of this allocation is dedicated to solar energy, with over INR 24,224 crores set aside for various solar initiatives. Leading programmes such as the PM Surya Ghar Muft Bijli Yojana and the KUSUM Scheme have been allocated INR 20,000 crores and INR 2,600 crores, respectively. Allocations have increased substantially for alternatives too.

Revival of Green Hydrogen

Amid uncertainty over the future of green hydrogen, with Origin Energy’s exit delivering a major blow to the global GH2 sector, India’s Union Budget 2025-26 has signaled green light by allocating INR 600 crore to the National Green Hydrogen Mission. This is a whopping 100 per cent increase over the previous INR 300 crore provided in the Expenditure Budget document for 2024-25. 

The NGH mission aims to position India as a leader in hydrogen-based energy, targeting annual production of 5 million metric tons by 2030. Increasing the annual allocation for green ammonia production from 5,50,000 to 7,50,000 tonnes per annum, MNRE highlighted its commitment to stimulate domestic demand for Green Hydrogen and its derivatives. 

By 2030, the cost of hydrogen is projected to decrease by 50 percent and the Government anticipates around INR 8 lakh crores of investment in this space. 

Recent Developments

India’s GH2 push is not unfounded with the industry attracting interest with Green hydrogen firmly in the spotlight at India Energy Week 2025 and having at least three major green hydrogen tenders issued by various tendering authorities in the fourth quarter of 2024 alone.

Waaree Energies approved INR 200 crore investment to set up a 300 megawatt electrolyser manufacturing plant under the Production Linked Incentive scheme. NTPC Green Energy is also developing a USD 21 billion green hydrogen hub in the region of Andhra Pradesh which is set to be the first green hydrogen hub under the National Green Hydrogen Mission. 

Last month, Greenstat Hydrogen India (GHI) and H2Carrier agreed to develop green hydrogen and ammonia projects in India and Sri Lanka.

Clean Nuclear Power

The most interesting development in the Budget 2026 was the weight put on Nuclear power. The Government of India (GoI) announced the Nuclear Energy Mission, which envisions adding 100 GW of nuclear power by 2047. To enable this, the Budget proposes amendments to the Atomic Energy Act and the Civil Liability for Nuclear Damage Act, permitting private sector participation. 

The Atomic Energy Act is an umbrella legislation that governs everything related to Nuclear Energy, its development and control. The Civil Liability for Nuclear Damage Act lays down the details regarding compensation for victims in case of a nuclear accident. These legislative amendments are expected to encourage private sector involvement.

Additionally, the government has also allocated INR 20,000 crore for the R&D of Small Modular Reactors (SMRs), a technology aimed at safer and more efficient nuclear power generation. Furthermore, the Government also plans to develop Bharat Small Reactors (BSR) by involving private entities in a bid to expand the sector. 

The expansion involves the construction and commissioning of ten reactors of about 8 GW across Gujarat, Rajasthan, Tamil Nadu, Haryana, Karnataka, and Madhya Pradesh. In addition, ten more reactors have commenced with pre-project activities which are expected to come live by 2031-32. Notably, the government has also approved the setting up of a 6 x 1208 MW nuclear power plant with the help of USA at Kovvada in Srikakulam district in the state of Andhra Pradesh. 

Recent Developments

GoI is actively seeking to make Nuclear power a reliable alternative. It initiated steps to increase nuclear power capacity from the current 8,180 MW to 22,480 MW by 2031-32. 

India has also been encouraging private investments in the nuclear energy sector for a while now. In February 2024, Reuters reported that the country aims to secure a USD 26 billion investment from five private energy firms, including Reliance Industries, Tata Power, Adani Power, and Vedanta. The money was aimed at adding an additional 11 GW of nuclear energy generation capacity by 2040.

Recently, in September 2024, the Rajasthan Atomic Power Project's Unit-7 (RAPP-7), one of the country’s largest and third indigenous nuclear reactors, reached criticality - the beginning of controlled fission chain reaction. In FY24, the first two units of the indigenous 700 MW PHWR at Kakrapar, Gujarat (KAPS - 3 & 4) began commercial operation. 

Further, the discovery of a new deposit in India's oldest Uranium Mine, the Jaduguda Mines, provided an impetus to the sector as its discovery means that the life of an otherwise depleting mine now has increased by more than fifty years. 

Moreover, a Joint Venture agreement was signed between NPCIL and National Thermal Power Corporation (NTPC) to develop nuclear power facilities in the country, showing a renewed interest in the sector.

Biogas Boost

Apart from solar, wind and other RE sectors suffered compared to the previous years. The total allocation for the Programme for Wind and other Renewable Energy has shown a decreasing trend from INR 846 crore in FY 2024-25 to INR 551 crore in 2025-26 budget, a degrowth of roughly 35 percent. Meanwhile, the biogas sector has risen as a key priority in the government’s clean energy initiatives.

Shifting its focus to alternative renewable sources other than wind and solar, the latest budget allocated over INR 325 crore to Biogas Energy Programme, up 75 percent from INR 185 crore earmarked in the revised budget of 2024–25. This is a momentous shift considering that the growth of the sector is now high on the government's priority list, especially in the face of degrowth of mainstream renewables like wind power. 

Recent Developments

India is poised to become the fastest growing bioenergy market in the world between 2023 and 2030, accounting for more than a third of global bioenergy demand growth. As per one IEA report, modern bioenergy accounts for 13 percent of India’s total final energy consumption. Compressed BioGas (CBG) is a purified form of biogas, meaning that the impurities like carbon dioxide and hydrogen sulfide have been removed from biogas.

The recent initiatives by the GoI present a positive outlook for the sector. The government has mandated the blending of CBG with CNG (Transport) and PNG (Domestic) in the City Gas Distribution (CGD) sector from FY 2025-26. 

The CBG Blending Obligation (CBO) is set at 1 percent, 3 percent, and 4 percent of total CNG/PNG consumption for FY 2025-26, 2026-27, and 2027-28, respectively, increasing to 5 percent from 2028-29 onwards. As a result, despite declining biogas production from small household  digesters, India’s demand for biogases is poised to climb by 25 percent by 2030 following accelerated growth for compressed biogas (CBG). 

Will Increased Allocations Help Non-Traditional Clean Energy Sources Thrive?

The renewed attention toward non-traditional clean energy alternatives is a welcome step toward diversifying India’s green energy future. However, the proper implementation will be a key to realise their potential contribution.

A system of innovation, coordinated development strategies, and relevant policy measures will play a crucial role. CBG trackable certificates, for instance, offer one approach to help meet India's CBG blending mandate. 

Similarly, the anticipated slash in green hydrogen prices by the end of the current decade is a prerequisite for its survival and triumph in the Indian market. As it stands, there is a substantial disparity between green hydrogen production costs (USD 5.3 - 6.7 per kg) and traditional grey/blue production costs (USD 1.9 - 2.4 per kg). This huge price differential is a major bottleneck in driving domestic offtake and attracting private investment. It also creates a classic market deadlock — green hydrogen costs can only decrease with scaled production, but scaling requires viable economics.

Nuclear power, on the other hand, has its own set of safety, waste management, and security risks. Interestingly, the recent budget reveals the reduction in the overall allocation of the Department of Atomic Energy (DAE) by INR 402 crore in 2025-26 and of the Nuclear Power Corporation of India Ltd (NPCIL) by INR 472 crore. This paradoxical situation is also raising eyebrows across the industry. 

Further, with coal still contributing for over 50 per cent of India’s energy needs, the absence of a phase-out strategy raises doubts about existing decarbonisation plans. This is because even with an aggressive nuclear and RE expansion, coal is still projected to reach  about 56 per cent of India’s power needs by 2030.