Budget 2026 will be a decisive moment for India’s energy transition and the Viksit Bharat 2047 goal. State utilities and public sector buyers are expected to sign long-term power purchase agreements that will shape India’s electricity mix — and public finances — for the next two decades. These contracts, often running for 20-25 years, will determine whether India’s future power system remains anchored to coal or pivots toward clean, reliable alternatives.
This inflection point comes when India’s renewable energy story is both impressive and incomplete. Installed renewable capacity has crossed 260 GW, and non-fossil sources now account for over half of total installed power capacity, well ahead of the country’s 2030 commitment. Yet, India’s past energy budgets, through public spending and policy support, prioritized capacity creation over system reliability. Despite rapid renewable growth, coal still dominates electricity generation during evening and night-time peak hours, when demand surges. Grid congestion, curtailment and rising variability are already imposing hidden costs on the power system, even as electricity demand is projected to grow at 6-7% annually through the next decade. Faced with the political and economic risk of power shortages, states are increasingly tempted to fall back on new coal-based procurement as the “safe” option.
In the absence of firm and dispatchable clean power, India risks locking itself into a paradox where renewable energy grows on paper, but coal remains indispensable in practice. Renewable energy round-the-clock (RE-RTC) must move to the center of India’s power strategy.
By combining solar, wind, energy storage and flexible generation into a single dispatchable product, RE-RTC closes the reliability gap that has long limited renewable energy’s ability to meet baseload and peak demand, reframing clean power not as an alternative but as a credible substitute for conventional thermal generation. The economics are now aligning with this shift. Battery energy storage costs have fallen by over 80% over the past decade, and recent Indian bids show storage-backed renewable tariffs in the range of ₹2.1-2.8 per unit for storage services, making bundled RTC power increasingly competitive with new coal. Crucially, RE-plus-storage projects can be commissioned within two to three years, allowing the power system to respond more quickly to rising demand.
Yet this raises a more fundamental policy question for Budget 2026: If reliability is now the binding constraint of India’s clean energy transition, are public finances aligned with this goal? And if RE-RTC is to become the backbone of India’s future power system, where must the budget intervene to unlock it at scale?
Transmission infrastructure remains the most critical bottleneck. Renewable capacity has expanded far faster than evacuation and balancing infrastructure, leading to congestion, curtailment, and under-utilization across multiple renewable-rich corridors. Studies by the Central Electricity Authority indicate that transmission additions are lagging demand growth and renewable deployment, with several interstate corridors already operating under stress.
Budgetary support must, therefore, prioritize high-capacity green energy corridors, dynamic line rating technologies, advanced substations and grid digitalisation. Capital support through centrally funded transmission schemes, coupled with faster regulatory approvals and risk-sharing mechanisms, is essential to ensure that renewable power can move seamlessly from generation centers to demand hubs.
Storage is the second pillar of reliability and the weakest link in current budgetary frameworks. While falling battery costs have attracted private interest, grid-scale storage remains capital intensive and commercially risky without public support. Budget 2026 must move beyond pilot allocations and create a clear financial architecture for storage deployment. This includes viability gap funding for battery energy storage systems, concessional long-tenure financing through public sector lenders, and targeted support for domestic storage manufacturing under existing production-linked incentive (PLI) frameworks. Pumped hydro storage, which offers long-duration balancing critical for multi-day reliability, also requires upfront public investment for site development, transmission connectivity and environmental clearances. Without these interventions, storage will scale too slowly to meet the reliability demands of a high-renewables grid.
Equally important is the procurement and market design framework that underpins power reliability. India’s electricity system remains locked into long-term coal-based power purchase agreements that prioritize fixed capacity over flexibility. These contracts constrain utilities’ ability to procure innovative products such as RE-RTC and impose long-term financial liabilities as coal costs rise. Budget 2026 should support reforms that enable aggregated RTC procurement, facilitate market-based auxiliary services, and strengthen real-time and day-ahead power markets. Public funding for digital platforms, forecasting tools and system operators can significantly improve grid responsiveness and reduce balancing costs, making RTC renewables commercially viable at scale.
India’s renewable sector attracted a record $3.4 billion in foreign direct investment in FY25, reflecting strong global appetite for clean energy assets with predictable returns. Yet investors increasingly differentiate between capacity and reliability. Projects that offer firm power, long-term offtake certainty and grid integration attract lower-cost capital. Budgetary instruments such as sovereign-backed guarantees, blended finance facilities and credit enhancement mechanisms can help crowd in international finance for RE-RTC projects, lowering the cost of capital and accelerating deployment without overburdening public finances.
By displacing coal generation across all hours of the day, RE-RTC delivers sustained reductions in air pollution, not just marginal emissions gains. Cleaner air translates into lower health expenditures, higher labor productivity and improved quality of life-outcomes that are central to a developed economy but rarely priced into energy planning. As the climate crisis increasingly disrupts economic activity, the resilience benefits of a clean, flexible and reliable power system will only grow.
Budget 2026 must recognize that the success of the energy transition will be judged not by megawatts installed, but by megawatts delivered — reliably, affordably and cleanly. Anchoring public spending around RE-RTC is not a departure from India’s clean energy strategy; it is its necessary evolution.
Aparna Roy is fellow and lead, climate change and energy, ORF. The views expressed are personal
