The Push And Pull

There is a need to find innovative solutions or financial models to address basic challenges like funding, lower bid values and state discom payment issues, feels PR Jaishankar, Chief General Manager, India Infrastructure Finance Company Ltd. (IIFCL).

According to estimates by the Central Electricity Authority (CEA), India’s electricity demand in 2021-22 is expected to be more than double the level it was in 2011-12. The agency, in its National Electricity Plan (NEP) 2017-2022, said that the country does not need any more coal-based capacity addition until 2022, as there are plans to add substantial renewable-based capacity. 

This further lends substance to India’s plans to increase the installed renewable energy capacity to 175 GW by 2022, up from around 46 GW as of September 2016. The 2022 target includes 100 GW of solar power, 60 GW of wind, 10 GW of bio-power and 5 GW of small hydro.

The targeted increase of renewable energy capacity to 175 GW require massive investments. However, a key challenge that exists in the provision of financing for the renewable sector is the high cost and unattractive terms of debt financing in India.

Such high cost of debt often raises the cost of renewable energy by 24-32 per cent in India, as compared to the US and Europe (Report by Climate Policy Initiative- ISB). The lack of adequate financing for renewable energy projects is also partly due risks at multiple stages, including those of state discoms failing to honour existing commitments or not entering into new PPAs for procurement of the relatively expensive renewable energy.