India’s Ministry of New & Renewable Energy is partnering with global firm Baker Hughes to develop geothermal power capacity. The government is evaluating tax incentives and viability gap funding to help lower the current high cost of geothermal energy generation. This move aligns with India's long-term Net Zero goals by diversifying its renewable energy mix.
The Indian Ministry of New & Renewable Energy (MNRE) has initiated discussions with global energy technology company Baker Hughes to explore the development of geothermal energy within the country. This move is part of a broader push to expand India’s renewable energy portfolio beyond the current reliance on solar and wind power. By tapping into the Earth’s internal heat, the government aims to support applications ranging from large-scale power generation to direct use in agriculture and cooling systems.
Strategic Focus on Geothermal Energy
During a meeting between MNRE Secretary Santosh Sarangi and Baker Hughes Vice President Graham Gillies, the focus was placed on leveraging international expertise to stabilize the national power grid and integrate new technologies. Baker Hughes offers significant experience in this sector, with capabilities covering the entire lifecycle of geothermal projects, including exploration, drilling, and heat utilization. The company’s portfolio includes specialized turbines for power generation, which are critical for converting geothermal heat into usable electricity.
Financial Incentives and Market Challenges
Developing geothermal energy is currently a capital-intensive process. Global industry data suggests development costs can reach approximately ₹36 crore per megawatt (MW) of capacity. Furthermore, the cost of power generated from these sources is estimated to exceed ₹10 per unit, which is currently higher than conventional renewable energy sources like solar. To bridge this gap, the Indian government is evaluating several financial mechanisms under the National Policy on Geothermal Energy, which was introduced in September 2025. Proposed support includes viability gap funding (VGF), concessional loans, and the use of Sovereign Green Bonds.
Fiscal Support and Future Growth
To make geothermal projects attractive for private investors, officials are reviewing various fiscal incentives. These include tax holidays, accelerated depreciation, and potential exemptions from import duties and GST on specialized equipment. India’s estimated geothermal energy potential is approximately 10 gigawatts (GW), although current development remains in the pilot and study stages. In comparison, global installed geothermal capacity sits at about 15.43 GW, showing that while the sector is nascent in India, there is significant room for growth if the cost structure can be optimized.
Investors should monitor the rollout of specific policy incentives and the announcement of pilot projects, as these will determine the speed at which geothermal energy becomes a viable part of the national power grid. The primary monitorable will be whether these government fiscal measures can effectively lower the entry barrier for private developers and bring generation costs closer to competitive levels.