After the Covid-19 setback, investment in the country’s renewable energy sector is rising again with the first four months (April to July 2021) of this fiscal seeing over $6.6 billion worth of investment.

According to the Institute for Energy Economics and Financial Analysis (IEEFA), the investment of $6.6 billion in the first four months has surpassed the $6.4 billion level for FY21 and is on track to overtake the $8.4 billion achieved in FY20 prior to the pandemic.

“Rebounding energy demand and a surge of commitments from banks and financial institutions to exit fossil fuel financing are helping drive investment into Indian renewable energy infrastructure,” Vibhuti Garg, Energy Economist, Lead - India, IEEFA, said in a statement.

Majorly acquisitions

The majority of the money flowed through acquisitions which helps recycle the capital into new projects.

The largest of around 30 deals during FY21 and April to July FY22 was SoftBank’s exit from the Indian renewable energy sector in May 2021 with a $3.5 billion sale of assets to Adani Green Energy Limited (AGEL). With this acquisition, AGEL became a major investor as well as the world’s largest solar developer.

Other major deals included Engie’s acquisition by Edelweiss Infrastructure Yield Plus for $550 million, Acme’s acquisition by Scatec Solar for $400 million, and Fortum’s acquisition by Actis for $333 million.

Analysis of the different deal types reveals that a majority of the other big deals were packaged as debt, equity investment, green bonds, and mezzanine funding. Indian renewable energy developers are attracting huge investments from green bonds, Saurabh Trivedi, Research Analyst, IEEFA, said.

In April 2021, ReNew Power raised money from green bonds with a tenor of 7.25 years at a fixed interest rate of 4.5 per cent per annum, and this was soon trumped in August 2021 by the $414 million 2026 green bond issue by Azure Power Global at a record low 3.575 per cent per annum.

The $8 billion special purpose acquisition company (SPAC) transaction between ReNew Power and RMG Acquisition Corporation II paves the way for a Nasdaq listing with expected trading from August 24, 2021.

“This is a landmark transaction as it represents the biggest overseas listing of an Indian company via the SPAC route,” says Trivedi.

Further investments required

India is clearly shifting towards renewables with the government redoubling efforts to boost energy security by expanding clean energy technologies.

In February 2021, IEEFA highlighted that India will require a further $500 billion in investment in new wind and solar infrastructure, energy storage, and grid expansion and modernisation to reach 450 gigawatts (GW) of capacity by 2030.

India is currently investing around $18-20 billion in energy generation capacity and a further $20 billion in the grid on an annual basis. To achieve the Sustainable Development Scenario (SDS) in the International Energy Agency’s India Energy Outlook 2021, the country would need to triple its current rate of annual investment to $110 billion.

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