As green energy pathways ease, India should pay special attention to round-the-clock renewables

Energy assessments indicate that electricity demand will expand by over 6% annually in the second half of this decade, driven by industrial growth, urbanization, data centres and the electrification of transport and buildings.

This demand surge will test the capacity of states to deliver reliable and affordable power. In this context, the ambition of a developed India by 2047 depends not only on capacity addition, but also on how energy planning is embedded in state-level development strategies.

Clean energy has, therefore, become central to India’s growth narrative. Yet, the spatial distribution of this transition is uneven. Renewable capacity additions, manufacturing investments and supply-chain ecosystems are clustered in a handful of renewable-rich states.

Meanwhile, coal-dependent states, long the backbone of India’s industrial economy, risk being marginalized in the next phase of growth.

The challenge is not abstract climate compliance. It is economic: limited diversification, mounting fiscal stress and declining investment attractiveness at a time when growth is becoming increasingly energy-intensive. Without policy recalibration, the energy transition risks widening regional disparities.

This raises a key question: Can India’s clean-energy strategy be redesigned to place coal-dependent states at the centre of the next development cycle?

A budgetary push for renewable energy round-the-clock (RE-RTC)—reliable clean power delivered through solar, wind and storage—offers an answer. By addressing the old reliability constraint, RE-RTC enables three interlinked development dividends that the budget can reinforce.

The first dividend is accelerated and more inclusive state-level growth. Despite rapid capacity addition, industrial productivity, urban services and digital infrastructure remain tied to coal because standalone solar and wind cannot guarantee uninterrupted supply.

RE-RTC changes this by delivering assured power without gaps.

Storage-backed renewables can be deployed within 2-3 years, far faster than the 6-7 years required for new coal capacity, allowing states to respond quickly to demand growth.

By helping the grid maintain its balance and meet peak power demand, RE-RTC lets clean power function as a dependable input for manufacturing clusters, data centres, small firms and infrastructure projects.

Evidence of this growth dividend is already visible. According to Lok Sabha data, India’s production-linked incentive (PLI) scheme for high-efficiency solar photovoltaic manufacturing had generated nearly 43,000 jobs by October.

Gujarat accounts for more than half of this employment, illustrating how states that align industrial policy, infrastructure spending and renewable deployment are making clear gains.

The second dividend is financial resilience for states and electricity distribution companies (discoms). Both are under strain from rising procurement costs, legacy coal-based power purchase agreements (PPAs) and weak balance sheets.

Yet, many continue to contract new coal capacity through long-term PPAs, locking in high fixed costs for decades. As renewable tariffs fall and system flexibility improves, such contracts heighten the risk of stranded assets and constrain fiscal space.

Coal-based power is also increasingly exposed to fuel availability risks, logistical disruptions and water-stress risks that raise costs for states.

Battery energy storage system (BESS) costs, central to RTC supply, have fallen by over 80% in the past decade. Recent competitive bids have delivered effective tariffs in the ₹2.1-2.8-per-unit range, making storage-backed renewables increasingly competitive with new coal-based power.

Strategic budget support can accelerate this shift while improving discom creditworthiness.

RTC deployment also strengthens states’ ability to crowd in external capital. In 2025, Rajasthan led the country in fresh investment commitments, with a dominant share directed towards solar energy, followed by Maharashtra, Gujarat and Odisha.

The third dividend lies in public health and development outcomes. Poor air quality imposes economic costs through lost productivity, higher healthcare expenditure and reduced quality of life.

Unlike partial renewable substitution, RE-RTC can displace coal generation across the day, delivering sustained air-quality improvements rather than episodic gains.

These benefits have direct fiscal relevance. Healthier workforces improve labour productivity and reduce public health expenditure, complementing budget investments in human capital. They also enhance urban liveability, a key factor for attracting investment and skilled talent to industrial regions.

As the budget approaches, choices around power procurement, storage and grid investment will shape how states plan for energy demand. States that do not adjust their energy strategies risk facing higher costs, tighter fiscal constraints and reduced investment.

RE-RTC is not just a transition slogan, but a fiscally and economically sound pathway that aligns energy reliability with development priorities.

The authors are, respectively, fellow and lead; and fellow, climate change and energy, Observer Research Foundation.