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India needs $27.9 b annually till 2029 to meet RE commitments

Our Bureau | | Updated on: Jun 22, 2022

| Photo Credit: NAGARA GOPAL

Cumulatively, India needs $223 billion by 2030 to achieve 450 gigawatts (GW) of solar and wind power capacity.

India will require a whopping $223 billion of investments, or roughly an average of $27.9 billion every year, to meet its goal of wind and solar capacity installation target of 450 gigawatts (GW) by 2030.

The report, Financing India’s 2030 Renewable Ambition, reveals that commitments from Indian companies could help achieve 86 per cent of its 2030 goals.

By 2021, 165 GW of zero-carbon generation has already been installed in the country. India’s Central Electricity Authority (CEA) forecasts the country’s reliance on coal to drop from 53 per cent of installed capacity in 2021 to 33 per cent in 2030, whereas solar and wind together make up 51 per cent by then, up from 23 per cent in 2021, it added.

The report by BloombergNEF (BNEF) has been published in association with the Power Foundation of India (PFI). The report assesses the total investments required for India to reach 500 GW non-fossil fuel power generation capacity by 2030, along with the existing RE market challenges faced by investors and project developers.

“If the country is to achieve its renewable energy installation commitment by 2030, an average of USD 27.9 billion will be required annually from 2022 to 2029. Growth in power generation capacity will also require parallel investments in the transmission and distribution grids,” the BNEF report pointed out.

India aims to reduce carbon emission intensity by more than 45 per cent by 2030 below 2005 levels, and to achieve this target, the government is increasing non-fossil power capacity to 500 gigawatts (GW), of which, 450 GW will be from renewable energy sources.

The country’s power generation capacity grew by 118 per cent between 2011 and 2021. Renewables’ share of capacity reached 37 per cent in 2021 from 31 per cent in 2012. Solar power has expanded the fastest, reaching 60 GW in 2021 from less than 1 GW in 2011.

Financing RE power

BloombergNEF Head of India Research, Shantanu Jaiswal, said: “To date the growth of renewable energy (RE) in India has been funded by a diverse set of financiers. Debt and equity structures have evolved as the market grew and new risks emerged. India’s ambitious renewable energy targets now require further scaling up of financing with new instruments and learnings from other global markets.”

Yet, the scaling up of renewables in India faces regulatory, project and financing risks, with PPA renegotiation, land acquisition and payment delays cited as key risks by industry stakeholders surveyed by BloombergNEF.

In the short-term, rising interest rates, a depreciating rupee and high inflation, create challenges for the financing of renewables.

Although conventional asset financing continues to be a major source of funding for RE assets in India, new financing paradigms need to be leveraged to meet India’s renewable targets by 2030. Enabling financing instruments in both debt and equity spaces can potentially help mobilise domestic capital and foreign investment, while improving risk management, it said.

New or underutilised sources of capital could be revolving construction debt, investment infrastructure trusts and funding from retail investors, insurance companies and pension funds. Higher funding requirements also need measures that can increase availability of financing such as de-risking renewable projects to offering contractual terms that provide greater comfort to investors, analyst at BNEF’s India research team Rohit Gadre explained.

Challenges

Renewable power developers face regulatory, project and financing risks. Power purchase agreement (PPA) renegotiation requests, difficulties in land acquisition and payment delays have been ranked as the top risks in a survey of 17 industry stakeholders.

Rising interest rates and inflation, coupled with the depreciation of the rupee against the US dollar, are creating new challenges. Regulatory tweaks to banking laws, dedicated funds for clean energy and liberalized rules for external commercial borrowing could help lessen these challenges.

Published on June 22, 2022
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