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India’s renewable sector must boost investments and access foreign financing if the world’s most populous country is to meet its target to more than double non-fossil fuel sources of power by the end of the decade, experts, officials and industry figures have warned.
India, which is the world’s third-largest emitter of greenhouse gases, according to the International Energy Agency, received total green energy investment of just over $13bn last year.
That falls far short of the $68bn needed annually to achieve New Delhi’s goal of producing 500 gigawatts of power from renewable sources by 2030, according to a report released this week by energy think-tank Ember.
“When you look at the gap of how much money has to flow into renewables, it’s very clear that, even in conservative targets, we need a lot more investments and financing than what is coming in,” said Neshwin Rodrigues, senior energy analyst for India for Ember and one of the report’s authors.
The report estimated that a total capital flow of $300bn by 2032 would be needed to keep India on track to meet its “ambitious” renewable energy targets.
India has about 209GW of installed renewable energy capacity, which contributes less than a quarter of the country’s total power generation, according to Ember and government data.
By comparison, China, the world’s largest polluter on an annual basis, generates about 35 per cent of its power from clean energy sources.
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The authors point to obstacles to financing in India’s renewable energy sector including “project commissioning delays, driven by land acquisition challenges, grid connectivity issues and regulatory hurdles”.
The US has also accused Gautam Adani, the billionaire founder of Adani Green Energy, India’s largest solar operator, of orchestrating a bribery scheme to win contracts in the country. Adani Group has dismissed the allegations as “baseless”.
Despite India’s strong demand for renewable energy, “in the short term” the allegations involving Adani “increase the risk” perception of India, said Vibhuti Garg, South Asia director with the Institute for Energy Economics and Financial Analysis.
Moody’s said last week that India’s power sector would need to invest up to 2 per cent of GDP over the next decade to achieve Prime Minister Narendra Modi’s 2070 net zero pledge — more than what the rating agency said China and Australia would invest over that period.
S&P Global’s India subsidiary Crisil estimated in a report last month that India’s green investments totalled nearly $70bn between 2019 and 2024. This will need to go up to $350bn in the next five years if it is to meet its green energy targets, Crisil forecast, which it said would be an “uphill task” because of perceptions of low-carbon projects as being high-risk, longer gestation periods and changing regulatory policies resulting in an unpredictable business environment.
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Such financial shortfalls highlight the challenges facing India’s green energy transition. Officials, industry leaders and experts pointed in particular to the sector’s struggle to raise foreign capital. India’s minister for new and renewable energy Pralhad Joshi last month stressed the need for “even higher renewable financing”.
“Access to long-term low-cost capital and foreign capital will be essential to bridge the funding gap” for the renewables sector, Moody’s said.
The Reserve Bank of India offered more than $1bn of 10-year sovereign green bonds between November and January, of which 75 per cent did not find any takers.
Yet raising foreign capital has been hamstrung by protectionist policies that limit the ability to hedge against the rupee’s fall in the long term and the state setting electricity prices, according to one western diplomat.
Sumant Sinha, chair of Nasdaq-listed ReNew, one of India’s largest renewable energy companies, said there was international equity funding available and domestic banks had stepped up lending. But “one part of the market the Indian companies are not able to or are not accessing right now is the international bond market”, he said.
Vinay Rustagi, a renewable industry expert and director of Premier Energies, pointed to high interest rates and global expectations of higher returns as hurdles for fundraising.
“Investors have become more selective,” he said.
Data visualisation by Haohsiang Ko in Hong Kong
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