India’s “ambitious” target to check climate change by increasing the production and contribution of renewable energy (RE), particularly solar, by 2030 is a “daunting” task, and the “foremost” challenge is an investment as the country would require a funding of more than $500 billion to meet these goals, rating agency ICRA said on Wednesday.

India aims to have 500 gigawatts (GW) of power capacity from non-fossil fuels, and at the same time, intends to meet 50 per cent of its energy requirement from RE by 2030. Besides, it will bring down the carbon intensity of its economy by less than 45 per cent. These initiatives are part of the country’s efforts to become a net-zero Co2 emitter by 2070.

ICRA’s Head of Research and Outreach Rohit Ahuja said that ambitious targets for COP26 open massive investment opportunities across segments stemming from 500 GW RE by 2030, higher EV penetration (around 10 per cent by 2025), 20 per cent ethanol blending for petrol (around 3x increase from current levels), improvement in energy efficiencies (battery storage, smart cities, etc.) and improvement in carbon capture from enhancing green cover.

“This would be a daunting task, and would need massive policy interventions to ensure investments across aforementioned sectors remain profitable enough to sustain well beyond 2030,” he said.

Ahuja emphasised that to achieve the net-zero target by 2070, a focused roadmap would be required, which calls for timely interventions by the government and large Capex/ investments in greenhouse gas (GHG) emitting sectors like power industry and transport. Together, these sectors emit around 90 per cent of CO2 as per 2019 data of the International Energy Agency.

ICRA, in its first climate series report, said, “The Indian government currently has been gearing up to achieve the goal for 2030, which also has as many challenges - the foremost being funding”.

It estimates that investments required to achieve a non-fossil fuel capacity of 500 GW by FY2030 remain large at about $300 billion over the next 8-9 years. Besides, funding would be required to expand the transmission infrastructure for integrating RE power with the electricity grid, as well as investments in battery storage. It expects investments in transmission and storage to be over $200 billion over the next 8-9 years.

“The investment ranges from Rs 4-7 crore per megawatt (MW), currently depending on solar/ wind/ hydro projects. This means till 2070, the approximate investment needed will be around $6 trillion annually. Thus, availability of adequate funding avenues remains critical to achieving capacity targets,” it added.

Critical issues faced in getting funding for RE projects include delay in promised funding from developed countries, availability of finacing at competitive cost rates and a buoyant domestic green bond market.

“However, challenges remain in the form of minimum rating requirements for investment by insurance and pension funds as well as the lack of liquidity in the bond market. Further, from the developer’s perspective, challenges arise owing to the preference for relatively shorter tenure bonds (3-5 years) by the investors leading to refinancing risks,” the agency added.

Ahuja stressed that being one of the fastest-growing economies globally, India needs to find a delicate balance between reducing carbon emissions and surging energy needs.

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