India will require an investment worth US$500-700 billion in renewable energy and associated grid integration and expansion over the coming decade in order to meet its renewable energy targets, finds a new IEEFA report.
The huge investment opportunity arises as the country’s Central Electricity Authority is now targeting an ambitious renewable energy target of 523 GW by 2030—the report noted, adding that India is set to reach 144 GW of renewable energy by the end of financial year 2021/22.
The report highlighted that the government is paving the way for increased investment by putting in the right policy framework with announcements like payment security mechanism enhancements and removing the priority lending limit.
Author Tim Buckley, Director of Energy Finance Studies at the Institute for Energy Economics and Financial Analysis (IEEFA), said: “The world is looking to invest in India’s renewable energy sector…..The country has a clear ambition to transition to a cheaper lower emission electricity system, and that ambition is attracting healthy global investment.”
However, “Global capital flows will into India will accelerate as long as the Indian government provides a clear policy framework and puts in place measures to lower risks and protect investor confidence,” Buckley stated.
The IEEFA note entitled “International Capital Awaits Robust Policy Environment in India’s Renewables Infrastructure Sector” highlighted multiple examples of international investment in India’s renewable energy projects, while also noting recent obstacles to India’s renewable ambitions, including a slow-down in the tendering process, grid integration constraints, and issues with excessively aggressive tariff caps on reverse auctions.
As a result, “during FY2018/19 India failed to capitalise on the momentum built over the previous two years through record low solar and wind tariffs. Only 10.3 GW of renewable generation capacity was added in FY2018/19,” read the note.
Co-author Kashish Shah said: “The slowdown masks some very positive policy announcements recently, which accelerated tendering activity in June 2019 post the Central election.”
“The proposed tariff policy revision and the payment security mechanism enhancements are both significant regulatory reforms, while removing the priority lending limit for the renewable energy sector will accelerate private bank lending to renewable energy infrastructure projects.”
“There is however a need for better coordination between central and state governments to ensure ambitious renewable targets can be met state by state and across the country as a whole.”