Budget 2022 decoded: A roadmap for Indian Energy Sector with a focus on Solar Industry

February 11, 2022

“The budget announcements have been fairly progressive, laying out the framework for the emerging requirements of the energy sector.”

– Mr. Sanjeev Aggarwal, MD & CEO, Amplus Solar.

The Union Budget 2022-23’s outlook for the renewable energy sector is to make India more competitive and self-reliant. It introduces a slew of measures to propel India’s transition to a greener, low-carbon economy, which is the need of the hour considering the risk of the climate crisis. The government policies, incentives, and solar subsidies will further prioritize domestic solar PV manufacturing to help meet the ambitious solar targets and install Distributed Renewable Energy projects in several border villages.

Focus on Domestic Manufacturing

India is looking forward to making large capacity additions to achieve the 280 GW of installed solar capacity by 2030 as per the union budget 2022. One thing that the country would do differently this time is to nurture local manufacturing sectors via the Production-Linked Incentive (PLI) program, which has received a good response since its introduction in last year’s budget.

Talking about the budgetary allocation, the PLI program is set to receive an additional Rs 19,500 crore (showing a 29% increase over the previous year) to boost the manufacturing of high-efficiency solar modules. The objective is to facilitate the domestic manufacturing of fully-integrated units everything from solar PV modules to polysilicon (a key input in the solar supply chain). This additional funding is likely to make India self-sufficient in solar production and reduce reliance on solar equipment imports across the value chain.

Important Points of Discussion from the Union Budget 2022 speech

Energy Storage

The ministry aims to ensure credit availability for clean energy storage and digital infrastructure through data centers and energy storage systems. These systems will also include dense charging infrastructure and grid-scale battery systems, among others. However, a battery swapping policy will be implemented to compensate for limited charging stations in urban areas.

Energy Saving/ Efficiency

The budget highlights the need for energy-saving and encourages the Energy Service Company business model for the robust implementation of energy efficiency and saving measures in large commercial buildings. The intention is to support capacity building (the process of strengthening organisational infrastructure, among other things, for sustainability) through commercial solar solutions. Also, it will instill awareness for performance contracts, energy audits, and verification protocols.

State Inclusions

The new legislation will outdate the Special Economic Zones (SEZ) Act and give states the power to actively participate in the development of enterprise and service hubs. This will apply to both current and upcoming industries that will be able to better leverage existing digital infrastructure and improve India’s export competitiveness. The budget 2022-23 also allows the states a fiscal deficit of 4% of GSDP, wherein 0.5% is linked to power sector reforms on conditions stated in the previous budget 2021-22.

Duty Concession

The finance minister also made a case against import duty concessions in the budget speech. Data shows that reasonable tariffs can, in fact, help provide a level playing field to the local manufacturers/solar panel companies and support ‘Make in India’ without significantly impacting essential import prices. This particularly applies to power generation, coal mining, transmission or distribution projects, metro, and railway. To that end, the budget proposes to gradually restore a moderate tariff of 7.5%, with the exception of advanced machinery that India doesn’t manufacture.

2030 Commitment: How Will This Budget Help?

Refer to Mr. Sanjeev Aggarwal, MD & CEO, Amplus Solar’s reaction to the Union Budget 2022

“The policy announcements in the energy storage sector like battery swapping framework, battery as a service, and storage being part of the infrastructure will surely help get the right traction for this essential component of the green energy ecosystem.

The government has also further pushed the agenda of Make in India with PLI enhancement of Rs.19,500 Cr for solar module manufacturing, and we should expect more companies to benefit from this. Similarly, other forward-looking measures like biomass palletization, energy efficiency, and coal gasification will help in reducing our fossil fuel dependence.

The government proposal to raise funding from sovereign green bonds is a well-timed one that can help in reducing the cost of borrowings. Similarly, allowing states to have an additional 0.5% fiscal deficit for power sector reforms will go a long way in strengthening the ailing distribution sector.”

Making Solar Installation Easy

India’s solar sector had two major expectations from India’s 2022 budget – to safeguard and encourage domestic manufacturers and to introduce policy changes/incentives that would provide financial help to the sector and boost demand for solar, and attract investments. As also observed by the Union Power Minister, this year’s budget recognizes these needs.

The increased funding under the PLI scheme will facilitate manufacturing of domestic solar cells and PV modules. This will go a long way in making India self-reliant and possibly an export oriented nation when it comes to solar. Furthermore, the country will be able to make commercial and industrial solar installations easier and more cost-effective in the long run with locally-sourced solar modules. At the same time, the 2022-23 budget for MNRE for SECI investment has been reduced below Rs 1,000 Cr from Rs 1,800 Cr in 2021-22.

India’s solar budget 2022 offers so much to look forward to and is expected to encourage commercial and industrial solar adoption as well as residential rooftop solar system installations. At Amplus Solar, we aim to support businesses and individual homeowner’s to become power-independent with on-grid and off-grid solar systems tailored to suit their individual energy needs. As Asia’s leading distributed energy company offering low-carbon solar energy solutions, our project portfolio features a diverse set of renowned global customers. If you want to reduce the operational cost of your business and envision a sustainable future, we can help you lead the change.