By Preeti Wadhwa
India has made remarkable progress in advancing its renewable energy sector through policy and regulatory announcements across the renewable energy and energy storage segments over the past one year. The key developments include policies for distributed solar, incentives for production of green hydrogen and its derivatives, and manufacturing of electrolysers, offshore wind energy, hydro projects in the north-eastern states and compressed biogas uptake.
Renewable Watch provides a round-up of the key policies and regulations introduced for the renewable energy sector during the past year…
Green hydrogen
Incentive for production of 200,000 mt of green hydrogen: The Ministry of New and Renewable Energy (MNRE) introduced a framework to encourage an annual production of 200,000 metric tonnes (mt) of green hydrogen. These incentives will be awarded for a duration of three years. The programme has a comprehensive budget of Rs 130.5 billion. During the initial year, the incentive will be Rs 50 per kg, followed by Rs 40 per kg in the second year, and further reduced to Rs 30 per kg in the third year.
Pilot projects in shipping, steel and transport sectors: The government released pilot project guidelines in the shipping, steel and transport sectors under the National Green Hydrogen Mission (NGHM). The shipping sector will focus on green hydrogen for ship propulsion and refuelling at ports, backed by a budget of Rs 1.15 billion until 2025-26. In the steel sector, the MNRE will allocate Rs 4.55 billion by 2029-30 to explore hydrogen’s role in reducing iron and replacing fossil fuels. Meanwhile, the transport sector’s Rs 4.96 billion budget will support hydrogen fuel in vehicles, with plans for setting up refuelling infrastructure.
The government also sanctioned three pilot projects to explore the use of hydrogen in steel production under the NGHM. These pilot projects include producing direct reduced iron (DRI), using 100 per cent hydrogen in a vertical shaft, using hydrogen in blast furnaces to reduce coal/coke consumption and injecting hydrogen into vertical shaft-based DRI units. The companies developing the approved projects are Matrix Gas and Renewables Limited (50 tpd plant), Simplex Castings Limited (40 tpd plant) and Steel Authority of India Limited (3,200 tpd plant). The Government of India has allocated Rs 3.47 billion as financial support, with these projects expected to be commissioned within three years.
The MNRE also launched a Rs 2 billion programme through 2025-26 to promote innovation in green hydrogen production and usage, focusing on decentralised production methods such as floating solar, biomass and wastewater. Disbursements under the central financial assistance (CFA) will occur in stages – 20 per cent on letter of award issuance, 70 per cent based on milestones and 10 per cent based on project completion.
Green hydrogen hubs: The MNRE released guidelines for establishing green hydrogen hubs as a part of the NGHM. The mission aims to establish a minimum of two green hydrogen hubs by fiscal year 2026. The budget allocation for the scheme is Rs 2 billion until 2025-26.
Incentive scheme for electrolyser manufacturing Tranche II: The MNRE has allocated Rs 44.4 billion to encourage the production of electrolysers, aiming to lower expenses for hydrogen generation under the NGHM. The incentives, a part of the Strategic Interventions for Green Hydrogen Transition (SIGHT) programme, Component I (incentive scheme for electrolyser manufacturing Tranche II), will be effective from 2025-26 to 2029-30.
ALMM, RLMM waived for green hydrogen plants: The MNRE exempted renewable energy projects used for green hydrogen production from the Approved List of Models and Manufacturers (ALMM) for solar modules and the Revised List of Models and Manufacturers (RLMM) for wind turbines. This applies to projects located within export-oriented units or special economic zones that supply electricity solely to green hydrogen production facilities in these areas. The exemption is valid for projects that meet the required conditions and are operational by December 31, 2030.
Amended guidelines for procurement of green ammonia production: The MNRE revised guidelines for green ammonia procurement under Mode 2A of the NGHM, increasing the annual allocation for the fertiliser segment from 550,000 tonnes to 750,000 tonnes.
Guidelines for 450,000 mtpa of green hydrogen: The MNRE released guidelines for the disbursement of incentives for production of green hydrogen up to 450,000 mt per year as part of Component II (Mode 1, Tranche II) of the SIGHT programme. Green hydrogen producers will receive incentives over three years, with limits set at Rs 50 per kg in the first year, Rs 40 per kg in the second year and Rs 30 per kg in the third year. For products derived from green hydrogen, incentives will be allocated based on the amount of green hydrogen used in their production. The MNRE determined an equivalence factor of 0.1765 kg of green hydrogen per kg of green ammonia. The programme’s auctions will be divided into two categories: Bucket 1 of technology-agnostic pathways with a capacity of 410,000 mt per year and Bucket 2 of biomass-based pathways offering 40,000 mt per year.
Funding guidelines for green hydrogen testing facilities: The MNRE launched a Rs 2 billion programme to enhance testing facilities, infrastructure and institutional support for the green hydrogen value chain, till 2026. The programme will fund up to 100 per cent of capital expenses for government entities and 70 per cent for non-government entities, covering equipment, installation and commissioning costs. Additionally, up to 15 per cent of the funding can be allocated for operational expenses for four years after project completion.
Solar energy
PMSGY: This policy aims to provide free electricity to 10 million households through residential rooftop solar installations, backed by a Rs 750 billion investment. Under the (PMSGY), households can receive up to 300 units of free electricity monthly, facilitated by substantial subsidies deposited directly into beneficiaries’ accounts and access to low-interest, collateral-free loans. CFA will cover 60 per cent of the system cost for capacities up to 2 kW and 40 per cent for systems between 2 kW and 3 kW, capping subsidies at Rs 78,000 for 3 kW or higher. A national online portal will streamline applications and stakeholder engagement. The programme allocates Rs 657 billion as CFA for households, Rs 49.5 billion for discom incentives and Rs 10 billion for
local bodies.
Incentives to discoms under the PMSGY: The MNRE issued guidelines for discom incentives under the PMSGY, where discoms will act as state implementation agencies. The incentive component has a budget of Rs 49.5 billion, incorporated from the earlier Grid Connected Roof Top Solar Phase II programme, with the scheme’s total budget set at Rs 750.21 billion until 2025-26.
Operational guidelines for model solar villages and other guidelines
The MNRE issued guidelines for creating model solar villages under the PMSGY. This component has a budget of Rs 8 billion out of the scheme’s total Rs 750.21 billion allocation, with each village receiving Rs 10 million as CFA. Each village will be fully solarised, with all homes and public areas equipped with solar lighting, solar-powered water systems, agricultural solar pumps and solar street lights for community infrastructure.
The MNRE also introduced guidelines for the registration of solar photovoltaic (PV) modules and inverters under the PMSGY to help consumers select high-efficiency products for rooftop solar installations. Furthermore, the MNRE issued an office memorandum allowing vendors from neighbouring states to work in the union territories for the installation of rooftop solar systems.
The MNRE also launched “Innovative Projects” under the scheme, with a budget of Rs 5 billion to promote advancements in rooftop solar technologies, business models and integration techniques. Selected projects will receive financial support of up to 60 per cent of the project cost or Rs 300 million and annual innovation awards will offer prizes ranging from Rs 500,000 to Rs 10 million.
Revised programme to electrify 100,000 households with offgrid solar: The MNRE revised its programme to electrify 100,000 households in “particularly vulnerable tribal group” (PVTG) areas using off-grid solar systems under the PM JANMAN and PM JUGA initiatives, with an additional budget of Rs 9.15 billion. The revised plan includes solar lighting for 1,500 multipurpose centres and the solarisation of 2,000 public institutions in PVTG areas, to be deployed where grid electricity is unfeasible. The programme is funded through the MNRE’s development action plan for scheduled tribes and will cover 100,000 households across 18 states and the Andaman & Nicobar Islands, with previous PM JANMAN approvals integrated into this updated plan.
MNRE reinstates, suspends and reinstates the ALMM: The MNRE has had a fluctuating stance on the ALMM for solar PV modules, initially reinstating it for April 1, 2024, after a suspension in 2023-24, then placing it back in abeyance before reinstating it yet again. The ALMM, which is aimed at ensuring quality standards and promoting domestic manufacturing, was launched to cover government-sponsored or subsidised projects and rooftop solar under PM KUSUM, and exclude private and advanced-stage projects with module orders before March 31, 2024. However, with the latest order, the MNRE has withdrawn most exemptions, applying the ALMM fully to projects in the pipeline.
Wind energy
VGF guidelines for 1 GW offshore wind projects: The MNRE released guidelines for the implementation of the viability gap funding (VGF) scheme for 1,000 MW offshore wind power projects, with a total budget of Rs 68.53 billion until 2031-32. Two sites have been identified, a 500 MW project off the Gujarat coast and another 500 MW off Tamil Nadu, with the Solar Energy Corporation of India (SECI) serving as the implementing agency. SECI will conduct international competitive bidding, where developers must quote VGF per MW. The VGF will be released in phases – 25 per cent after the foundation work, 35 per cent after half the capacity is commissioned, another 35 per cent after full commissioning and 5 per cent after one year of operation.
Offshore wind energy lease rules: The Ministry of External Affairs has notified the Offshore Wind Energy Lease Rules, 2023. The central government has the option to grant leases for offshore areas located within the exclusive economic zone for projects related to offshore wind energy and offshore wind transmission. The MNRE will designate the offshore region for the lease through an evaluation of wind resources and subsequent marine spatial planning. The party leasing the area must engage in an agreement with the MNRE for the lease grant and the establishment of wind energy capacity, in accordance with government guidelines .
National Repowering and Life Extension Policy updated: The MNRE has updated the National Repowering and Life Extension Policy for Wind Power Projects to facilitate the replacement or refurbishment of older turbines with more efficient models, even before their design life ends. The policy identifies a repowering potential of 25.406 GW for turbines below 2 MW capacity, and offers incentives such as fiscal benefits, micrositing flexibility and preferential loans from REC, PFC and IREDA. Additionally, IREDA will provide a 0.25 per cent interest rate rebate on repowering project loans and may introduce tailored financing products. Refurbishment options include upgradation of components such as gearboxes, blades and generators, subject to safety and performance standards.
Bioenergy
Financial support programme to aid CBG producers purchase biomass aggregation machinery: The government has launched a Rs 5.64 billion programme (2023-24 to 2026-27) to support compressed biogas (CBG) producers in acquiring biomass aggregation machinery (BAM). The government will provide a maximum financial aid equivalent to 50 per cent of the BAM’s procurement cost or Rs 9 million per set, whichever is lower. Producers need to submit detailed project reports and funding will be allocated based on their biomass requirements.
Updated CFA rates for biomass pellet manufacturing units: The CFA rate for briquette manufacturing plants is set at Rs 0.9 million per metric tonne per hour (mtph) of production capacity, with a maximum CFA of Rs 4.5 million per plant now. The CFA for non-torrefied pellet manufacturing plants is Rs 2.1 million per mtph or 30 per cent of the capital cost for plants of 1 mtph, whichever is lower, with a maximum CFA of Rs 10.5 million per project. For torrefied pellet manufacturing plants, the CFA is Rs 4.2 million per mtph or 30 per cent of capital cost for plants of 1 mtph, with a maximum CFA of Rs 21 million per project.
Injecting CBG in the CGD network: The Ministry of Petroleum and Natural Gas issued guidelines for the development of pipeline infrastructure to inject CBG in the city gas distribution (CGD) network. The allocated budget for this initiative is Rs 9.945 billion for fiscal years 2024-25 to 2025-26. For calculation purposes, the cost is estimated at Rs 10 million per km for steel pipelines and Rs 1.5 million per km for medium density polyethylene (MDPE) pipelines. Financial assistance is provided for pipelines up to 75 km, with a maximum limit of Rs 287.5 million per project. For pipelines up to 50 km, the financial assistance will cover 50 per cent of the project cost or Rs 5 million per km for steel pipelines and 50 per cent of the project cost or Rs 0.75 million per km for MDPE pipelines, whichever is lower. For lengths between 50 km and 75 km, the financial assistance will cover 50 per cent of the additional cost, capped at Rs 1.5 million per km for steel pipelines and Rs 0.75 million per km for MDPE pipelines. Pipelines exceeding 75 km are not eligible for any financial assistance, but beneficiaries can extend these at their own expense.
Concessional customs duty certificates for bioCNG: The MNRE issued an office memorandum for the continued issuance of concessional customs duty certificates for the equipment needed to set up bioCNG projects, using non-conventional materials such as agricultural, forestry and municipal waste.
Blending CBG in CNG and PNG: The National Biofuels Coordination Committee mandated a phased blending of CBG into compressed natural gas (CNG) and piped natural gas (PNG) within the CGD sector, aiming to increase CBG usage nationwide. Starting as voluntary until 2024-25, blending will become mandatory from 2025-26, with targets set at 1 per cent in FY26, 3 per cent in FY27, 4 per cent in FY28 and reaching 5 per cent by 2028-29.
The union cabinet also approved modifications to the Pradhan Mantri JI-VAN Yojana in the bioenergy space. The modification extends its implementation timeline by five years to 2028-29 and expands its scope to include advanced biofuels from lignocellulosic feedstocks such as agricultural and forestry residues, industrial waste, syn gas and algae.
Hydropower and PSP
CFA approval for hydro projects in the north-eastern states: The union cabinet approved CFA for state governments in northeast India to support the development of hydroelectric projects through joint ventures with central public sector undertakings. This scheme, with a budget of Rs 41.36 billion from 2024-25 to 2031-32, aims to support a cumulative hydro capacity of 15,000 MW. State governments can contribute up to 24 per cent equity, with a maximum of Rs 7.5 billion per project.
Budgetary support scheme for HEPs : The MoP approved modifications to its scheme for budgetary support towards infrastructure costs in hydroelectric projects (HEPs), with a total budget of Rs 124.61 billion for implementation from 2024-25 to 2031-32. The scheme now covers costs for infrastructure such as transmission lines, ropeways and railway sidings, in addition to roads and bridges. It aims to support projects totalling 31,350 MW, including private and pumped storage projects (PSPs) with eligibility for projects awarded by June 30, 2028. Support is capped at Rs 10 million per MW for projects up to 200 MW and Rs 20 million plus Rs 7.5 million per MW for larger projects, with a possible increase in exceptional cases.
Additionally, the union budget announced plans for a comprehensive PSP policy, building on the framework introduced in April 2023.
BESS
VGF guidelines for BESS projects: The Ministry of Power (MoP) released operational guidelines for VGF of up to 40 per cent to facilitate the development of 4,000 MWh of battery energy storage systems (BESSs) nationwide. This initiative will span a duration of three years, starting from 2023-24 and concluding in 2025-26, with a budgetary allocation of Rs 37.6 billion. The programme mandates that projects must be commissioned within 24 months of the date of signing the agreement. Project allocations will adhere to the tariff-based competitive bidding (TBCB) process outlined in the MoP guidelines.
Transmission
The National Electricity Plan for transmission: The MoP launched the National Electricity Plan for transmission, developed by the Central Electricity Authority to support the transmission of 500 GW of renewable energy by 2030 and over 600 GW by 2032. The plan addresses the need for 47 GW of battery storage and 31 GW of pumped storage, along with over 191,000 ckt km of transmission lines and 1,270 GVA of transformation capacity to be added by 2032. Key expansions feature 33 GW of HVDC links, increasing interregional capacity from 119 GW to 143 GW by 2027 and 168 GW by 2032, with cross-border links planned for Nepal, Bhutan, Myanmar, Bangladesh and Sri Lanka, and potential connections to Saudi Arabia and the UAE.
Rs 135.95 billion sanctioned for ISTS projects: The government sanctioned new interstate transmission system (ISTS) schemes to evacuate 4.5 GW of renewable energy each from Rajasthan and Karnataka. These schemes will be executed in TBCB mode. They are a part of the broader plan to facilitate the uptake of the targeted renewable energy capacity by 2030. The Rajasthan renewable energy zone power evacuation scheme will evacuate 4.5 GW of renewable energy from Rajasthan. This includes 1 GW from the Fatehgarh complex, 2.5 GW from the Barmer complex and 1 GW from the Nagaur (Merta) complex. The energy will be delivered to the Mainpuri region, Fatehpur and Orai in Uttar Pradesh. The scheme, which will cost around Rs 122.41 billion, is expected to be completed within two years. Meanwhile, Karnataka’s system strengthening scheme will evacuate 4.5 GW of renewable energy from the Koppal and Gadag areas. This scheme is scheduled for completion by June 2027 and will cost approximately Rs 13.54 billion.
Conclusion
The past year has seen India making remarkable progress in renewable energy through a series of impactful policy and regulatory reforms. In the green hydrogen sector, the focus on production incentives, electrolyser manufacturing and pilot projects in steel, shipping and transport is a big positive for the sector. The focus in the coming years will be on establishing green hydrogen hubs to position India as a leading exporter of green hydrogen and its derivatives. Solar energy initiatives such as the PMSGY and offgrid solar electrification for vulnerable communities will accelerate energy access and expand rooftop solar capacity. In wind energy, offshore projects backed by VGF and streamlined leasing rules are set to give an initial push to the segment. In the bioenergy sector, the government has been proactive in addressing the challenges faced by CBG producers. A major issue – the high cost of establishing pipeline infrastructure to connect CBG plants with the CGD network – has been tackled through the announcement of financial aid for pipeline development. Additionally, increased financial support for biomass and CBG, coupled with mandatory blending targets, is set to promote a circular economy. On the transmission front, the National Electricity Plan and new interstate projects will bolster grid infrastructure, enabling efficient evacuation and distribution of renewable power. Clear VGF guidelines for BESS installations are expected to accelerate project execution, improve grid stability and renewable integration. Hydropower and PSP too will gain traction going forward, with greater financial and policy support, boosting energy mix flexibility and reliability.
All in all, India is decisively advancing its energy transition through proactive and forward-thinking policies and regulatory initiatives.
