Green Tariffs, Budget Crucial For RE Growth in Rajasthan, Gujarat: Report

The Institute for Energy Economics and Financial Analysis (IEEFA), in a briefing note, recommended a multifaceted approach to accelerate the renewable energy transition in two renewable-rich states namely, Gujarat and Rajasthan. This involves implementing strategic measures to enhance financial resources, improve market dynamics, and support effective governance. 

The note recommends the use of integrated green budgeting in their fiscal planning. “Green budgeting will allow Rajasthan and Gujarat to prioritise investments in renewable energy and green technologies,” says Tanya Rana. Among the better-performing states in India, Rajasthan and Gujarat only have about 7% and 15%, respectively, of their total renewable energy capacity (including large hydro) to distributed solar, which points towards a substantial untapped potential. The note recommends that both states increase their efforts to promote distributed renewable energy (DRE). The note found positive effects of progressive policies have helped them become powerhouses in this sector. Taking steps like implementing a green tariff, integrating green budgeting practices, setting up dedicated infrastructure funds, promoting distributed renewable energy, modernising the grid and developing storage solutions will help both states continue to lead India’s energy transition.

“India’s energy transition requires states to make a concerted effort to strengthen renewable energy initiatives. While states that are slower in their transition to clean energy need to ramp up efforts, even leaders like Rajasthan and Gujarat must keep taking stock and corrective measures to ensure they do not lose momentum,” says the note’s co-author Vibhuti Garg, Director – South Asia, IEEFA.

While Rajasthan currently does not have an incremental green tariff, Gujarat has one of the highest. Both states need to course correct, the note finds. “By enabling consumers to procure renewable power at a premium, Rajasthan can drive demand for renewable energy, encouraging further investments in renewable energy infrastructure without burdening consumers with high upfront costs,” says the note’s co-author Tanya Rana, Energy Analyst, IEEFA. “Gujarat should focus on refining its regulatory framework to ensure this pricing does not deter potential consumers,” she adds. “Promoting DRE can reduce pollution by decreasing reliance on centralised power plants, helping both states meet their renewable energy targets while creating jobs and stimulating economic growth,” says Rana.

The note also recommends the two states set up dedicated infrastructure funds designed to finance renewable energy projects. “These funds can provide the necessary capital for large-scale investments, enabling the states to implement ambitious renewable energy targets effectively,” says Garg.

Green Tarif

In Rajasthan, where an incremental green tariff is currently absent, the policy paper recommends  introducing such a tariff to stimulate a more robust green energy market. By enabling consumers to procure renewable power at a premium, Rajasthan can drive demand for renewable energy, encouraging further investments in renewable energy infrastructure without burdening consumers with high upfront costs. This could help to support Rajasthan achieve

As of 30 September 2024, Rajasthan’s installed renewable energy capacity was 29,981MW (including large hydro), representing approximately 7% of its total potential. The state generated 24,287.4 million units (MUs) of renewable energy from April to August 2024, achieving 12% year-on-year growth.

While Gujarat has a renewable energy potential of 220,505MW, representing a 10.45% share of India’s total renewable energy potential as of 31 March 2023, according to Energy Statistics Report 2024. It also reported has highest incremental green tariff among 21 states as analysed in the SET 2024 report. To boost renewable energy in the state, the policy recommended focusing on refining its regulatory framework to ensure this pricing does not deter potential consumers. Gujarat can maintain its role in advancing the renewable energy transition by balancing affordability and flexibility.

Integrating Green Budgeting Practices

The policy brief also recommended integrating green budgeting practices into their fiscal planning, it elaborated, Rajasthan and Gujarat to promotes economic growth while supporting environmental goals. Based on prior success in Odisha, Bihar, Assam, Meghalaya, Uttar Pradesh, Maharashtra and Pondicherry, the report demonstrates the effectiveness of this strategy in driving energy transitions and fostering long-term sustainability.

Thus, the report emphasize on adopting the right strategies, states like Rajasthan and Gujarat can effectively navigate the transition to a sustainable energy future, achieving their renewable energy goals while fostering economic growth and environmental sustainability.