The government is looking at allowing Central power companies to take a bigger financial risk for renewable energy projects. The power ministry is to take up with the finance ministry a proposal to lower the ‘hurdle’ IRR (internal rate of return) from 10% to 8% for green energy investments by power PSUs.
A lower IRR will encourage greater green energy investments by these companies, offering them a larger bouquet of projects. They currently are often handicapped from investing in projects with IRR of less than 10%.
The decision was taken at a meeting power and renewable energy minister R K Singh had with representatives of public sector power utilities last week. The decision is expected to stimulate renewable energy capacity addition, a key element of prime minister Narendra Modi’s ambition to hasten India’s low-carbon transition.
It was also decided at the meeting that power PSUs would be granted in-principle nod to bid for a pre-determined renewable energy capacity each year. This will help bring clarity in their green capacity planning. The strength of the balance sheet will determine the capacity for which each company will get in-principle clearance for bidding.
The meeting also decided to allow Central power producers to bundle supplies from renewable energy projects with new or untied/high-tariff hydro projects.