India’s renewable energy sector requires $500 billion to $700 billion of new investment by 2030 to meet its massive target of 450 gigawatt (GW) capacity, according to the Institute for Energy Economics and Financial Analysis (IEEFA).
“Smaller regional developers will also require domestic funding. India must free up the liquidity in the domestic banking system as soon as possible to keep India’s renewable energy ambition on track,” the research firm said in its report titled ‘India’s Renewable Energy Policy Headwinds – Recommendations for Urgently Accelerating Activity in the Renewable Energy Sector’ on Thursday.
Highlighting the financial constraints faced by renewable energy developers, the report added that sovereign risk, policy risks, erratic payments and India’s stranded assets in the thermal power were all stifling financing for the sector.
India’s transmission capacity grew hand-in-hand with renewable capacity between financial year 2014-15 (FY15) and FY16 and FY17-FY18, with average additions of 25,000 circuit kilometres per year.
“However for FY19-FY20, only 10,625 circuit kilometres of new transmission capacity is expected to be added. The recent slowdown in the growth in renewable energy capacity appears to have diminished the urgency of building new transmission capacity,” the report added.
India’s renewable capacity additions were expected to grow on average at 20 gigawatt (GW) to 25 GW in line with the target of 175 GW by December 2022. However, according to the research firm, less than 10 GW of on-grid renewable capacity and installs were added in FY18-FY19.
“This is expected to grow to 12 GW to 13 GW in FY19-FY20, which is up year-on-year but still tracking well below target,” it added.