Union Budget 2026-27 set a single-year renewable energy capacity addition target of 100 GW — a landmark ambition that would be the largest annual capacity addition in India's history and would require virtually doubling the rate of renewable energy commissioning achieved in FY26. The budget backed this target with a Rs 35,000 crore allocation for the Ministry of New and Renewable Energy, a Rs 12,000 crore viability gap funding mechanism for grid-connected solar and hybrid wind-solar projects in difficult geographies, a Rs 6,000 crore rooftop solar push targeting 1 crore homes under the PM Surya Ghar Muft Bijli Yojana expansion, and Rs 8,000 crore for the National Green Hydrogen Mission to catalyse green hydrogen production and export facility development.
The PM Surya Ghar Muft Bijli Yojana — which provides a central subsidy of Rs 78,000-78,000 per household for a 3 kW rooftop solar system that can generate sufficient electricity to virtually eliminate a household's electricity bill — was expanded in Budget 2026 to cover 2 crore additional homes, taking the programme's total target to 3 crore homes by March 2028. The scheme has been enormously popular since its launch, with 80 lakh registrations in the first six months, though actual installations have lagged due to delays in the supply chain for rooftop solar systems, net metering integration challenges with state DISCOMs and the capacity constraints of installer networks in tier-2 and tier-3 cities. The budget addressed supply constraints by extending the PLI for domestic solar panel manufacturing to 2030 and fast-tracking the domestic content requirement that incentivises use of Indian-made modules and cells in the subsidised installations.
Offshore wind energy, a nascent but high-potential segment in India given the country's 7,500 km coastline, received dedicated budget support for the first time — Rs 4,500 crore for offshore wind viability gap funding and a commitment to issue tenders for 10 GW of offshore wind capacity by 2027. The offshore wind resource potential on India's western and southern coastlines is estimated at 100+ GW, but high installation and transmission costs have made Indian offshore wind economically challenging relative to land-based solar. The budget's viability gap funding is designed to bridge the gap between offshore wind's levelised cost and the benchmark power tariff, incentivising first mover developers including NTPC, Adani Green and international players including Vestas, Ørsted and Shell to make the initial investments that will establish the supply chain, port infrastructure and grid connection capability needed for offshore wind to scale in India.
Battery storage has been identified as the critical missing piece of India's renewable energy integration strategy, with the budget allocating Rs 9,000 crore for grid-scale battery storage procurement under a viability gap funding mechanism, targeting 20 GWh of Battery Energy Storage System (BESS) capacity addition in FY27. Grid-scale batteries store excess solar energy generated during peak sunlight hours and discharge it during evening demand peaks — effectively extending the period of solar availability and reducing the need for expensive and polluting gas-based peaking power plants. The economics of battery storage have improved dramatically with LFP battery costs falling 60% since 2020, and the budget's viability gap funding is expected to trigger private sector procurement of batteries at scale that will further reduce costs through volume and competition.
The green energy budget reflects a sophisticated understanding of the system challenges of integrating large volumes of variable renewable energy into India's electricity grid. Beyond generation capacity, the budget funds grid modernisation — Rs 15,000 crore for the Green Energy Corridor Phase 3 transmission network connecting renewable-rich states with demand centers, Rs 5,000 crore for smart metering and demand response capability that can flex demand to match solar generation patterns, and Rs 3,000 crore for offshore transmission infrastructure including submarine cables for the offshore wind projects. The integration of these supply, storage and transmission investments is designed to create a coherent green energy ecosystem rather than individual components that underperform when deployed without the complementary infrastructure — a lesson learned from the first decade of renewable expansion where generation capacity was added faster than transmission and storage could handle, creating curtailment of renewable energy that wasted both the environmental benefit and the economic investment in the generation assets.
