As the world is about to complete five years of the historic Paris Climate Agreement, India has called for worldwide investment in its clean energy future.
While speaking at the 3rd Global Re-Invest, marquee renewable energy conference of the country (1), Narendra Modi, the Prime Minister of India, had made a strong case for the country as an attractive renewable energy investment destination.
India is the world’s fourth-largest renewable energy market. It needs to ramp up its investment if the country wants to meet its goals of increasing its renewable energy capacity 5x to reach 450 gigawatts by 2030.
Apart from fighting the climate crisis, India can create more than a million job opportunities by 2022, power rural livelihoods, and boost its economic recovery with renewable energy.
Clean Energy Investment Needs in India
India is one of the largest growing renewable energy markets globally. And it needs a clean energy investment of at least 20 to 30 billion USD annually. Notably, such investment is much higher for India than the average investment over the past five years of 8 to 10 billion USD per year (2).
Narendra Modi, the prime Minister of India, highlighted the growing demand over 36 GW Hindi upcoming three years for local manufacturing of solar PV.
India called for increased investment, emphasizing the need for private domestic and international funding since public funding alone is not enough to meet its climate goals.
It is worth highlighting that, even though the total FDI, foreign direct investment in India has been gradually surging over the years, clean energy and low carbon infrastructure has a small part of the capital influx.
Even local private and institutional investors have so far been into clean energy in parts because of the higher perceived risk and smaller ticket size of clean energy projects.
The Indian market requires a variety of financial products that can mitigate risk and create a robust climate financing ecosystem to grow the scale of investments.
Domestic institutions such as the IREDA, Indian Renewable Energy Development Agency having an essential role in raising capital and deploying funds effectively. There are certain innovative financial structures like a dedicated Green Window (3) that can utilize public funds to leverage private capital and have a huge potential to make a difference.
The MNRE, Ministry of New and Renewable Energy, had previously announced (4) its plan to set up the IREDA Green Window in December 2019. NS India is seeking greater green investment. It is the right time for the country to capitalize the Green Window and operationalize it.
At the RE-Invest session on green finance, Mr.P K Das, the Chairman of IREDA, reiterated IREDA’s commitment to lead as a renewable energy pioneer. He further added that NRDC and their partner, the Council on Clean Energy Environment and Water, are working closely with IREDA to operationalize the Green Window.
Fighting Climate Change with Global Partnership
Since India is the third-largest single country emitter of greenhouse gases, its climate and clean energy trajectory has significant global impacts. And the global community has started to recognize it increasingly.
The UK, the host of the climate change conference in Glasgow, is a key partner of India on Clean Energy. Alok Sharma, the Secretary of State for Energy, the UK, pointed out how renewable energy investments have repeatedly outperformed fossil investments.
Sharma stated that the UK plans to quadruple its offshore wind capacity by 2030 (5). He emphasizes how we need to work five times faster to save the planet earth in the upcoming ten years.
The major economies of Asia, such as China, Japan, and South Korea, have also announced their own carbon neutrality goals in the previous year. Notably, each of them has significant clean energy investments in India.
In the United States, the Biden and Harris administration has committed to rejoining the Paris agreement and has indicated climate change is a priority for India and US strategic partnership (6).
R K Singh, the Minister of Power of India, stated that India is looking to achieve its climate transition goals in partnership and cooperation with all countries.
It is worth noting that Clean Energy is the fuel of the future. To translate its goal into reality, India needs to strengthen its clean energy finance ecosystem further to attract private investment domestically and overseas.
Indian Renewable Energy Sector
The country’s renewable energy sector is the fourth most appealing clean energy market across the globe (7). Notably, India has ranked fifth in wind power, fifth in solar power, and fourth in renewable power installed capacity in 2019.
Over the past several years, India has significantly improved its installed renewable power generation capacity with more than 17.33% CAGR between the financial year 2016 and 2020 (8).
With the improved economics and increased support from the Indian government, the sector has become attractive from investors’ perspective.
As the country is looking to meet its energy demand, expected to reach about 15,820 TWh in the next two decades, renewable energy has the potential to play a key role.
Notably, the Indian government aims to achieve at least 227 GW of renewable energy capacity by 2022. It includes 114 GV of solar capacity and 67 GW of wind power capacity. It is more than India’s 175 GW target according to the Paris Agreement. Moreover, India’s government is also planning to establish its renewable energy capacity of 500 GW by 2030.
As of November 2020, India’s installed renewable energy capacity stood at 90.39 GW. The solar and wind comprised 36.91 GW and 38.43, respectively, and biomass and small hydropower constituted 10.14 GW and 4.47 GW.
Notably, India has issued 15,100 MW of wind power projects by December 2019, with 12,162.50 MW capacity projects already realized. In the financial year 2020, India has already reached 127.01 BU Billion Units of power generation from renewable energy sources (9).
Clean Energy Investment Opportunities in India
On Thursday, John Kerry, the top US official (10), stated that ‘India is a red-hot investment opportunity for its clean energy transition’ as he praised Narendra Modi, the Prime Minister of India, for his dedication to addressing the challenge posed by climate change. Notably, the Biden administration also believes that it poses an existential threat to humanity.
Kerry is the special presidential envoy for climate, stating that he intends to work very closely with the Indian leadership, including the Prime Minister and External Minister of India.
He believes that India can be one of the most critical transitional nations in this entire endeavor. He is confident that just as the US has worked closely on any number of issues in the past years, both nations, the world’s two largest democracies, have a great deal to gain from joining hands in global leadership and confronting the climate crisis to meet the moment.
Notably, Kerry is the first official on climate to be inside the US National Security Council. While addressing the World Sustainable Development Summit 2021 (11), he stated that ‘India is actually a red-hot investment opportunity for its clean energy transition,’ and he is looking forward to visiting India soon.
He added that Indian Prime Minister Modi had made very important contributions to the dialogue, and it is needless to say that India is deeply committed to this challenge.
Kerry stated that the Indian Prime Minister Modi’s announcement to offer a target of 450 gigawatts of renewable energy by 2030 is a terrific example of how to power a growing economy with clean energy. Since India is already the third-largest emitter in the world today behind the United States and China (12), it will be one of the most important contributions.
While referring to the latest report of the International Energy Agency, India’s down payment on the clean energy transition puts it on the path to become the global market leader in solar and storage by 2040.
Since India is constantly working on a rapid scale, it has become cheaper to build solar in India than anywhere else across the globe. It is the kind of urgency we need in order to confront the crisis that we confront today, stated Kerry.
It is worth highlighting that after coming to power, the Biden administration has quickly established contact with the Indian leadership. The leadership between the two countries at the top level has known each other for a long time and has put the relationship on a fast track.
In a recent interview, Taranjit Singh Sandhu, the Indian ambassador to the US (13), 25 climate change is one of the key pillars of collaboration between the two Nations.
It is also one of the discussion topics between the Indian Prime Minister Modi and US President Joe Biden earlier this week. It was also the discussion topic when they spoke in November, soon after the United States election results were released (14).
Kerry comprehended his speech that India is a pivotal partner of the United States under the bed and administration and would take it over from where the previous Trump administration left the relationship.
While talking about climate change, Kerry stated that he knows that Prime Minister Modi is committed to this initiative and so are Indian businesses. He added that the International Energy Agency forecast that by 2030 (15), if India drives even more aggressively towards its clean energy transition, it will create half a million additional jobs and business as usual would create.
Indian industries are already stepping up and showing leadership in the global market. Kerry was very pleased to hear that dozens of India’s biggest companies recently signed a declaration on climate change and a place to go carbon neutral (16).
Investments and Developments
According to the data released by DPIIT, the Department for Promotion of Industry and Internal Trade, the FDI, Foreign Direct Investment inflow in the Indian non-conventional energy space stood at 9.68 billion USD between April 2000 and September 2020 (17).
Notably, the Indian renewable energy sector has clocked more than 42 billion USD since 2014, and new investment in Indian clean energy has already reached more than 11.1 billion USD by 2018.
It is worth highlighting that in November 2020, SunSource Energy declared that it would develop a 4MW grid-connected floating solar PV power project with a 2 MW BESS, Battery Energy Storage System in Andaman and Nicobar Island, and has won in a tender bid with the SECI, Solar Energy Corporation of India.
The AAI, Airports Authority of India signed a memorandum of understanding with NTPC Vidyut Vyapar Nigam in November 2020. It is an NTPC subsidiary to promote electric vehicles’ usage and set up solar plants at airports.
Peten Engineering, in October 2020, had announced that it had won an order worth 211.5 million USD, about 1,562.42 crore INR, to build a 2,000 MW Subansiri Lower Hydroelectric Project in Arunachal Pradesh.
It is also worth highlighting that the country has added more than 2,320 MW of solar capacity amid the COVID-19 pandemic crisis between January and September 2020.
Tata Power had announced its plan to set up a 100 MW solar project in Dholera Solar Park, Gujarat, in October 2020 (18). And during the same period, NTPC set up a wholly-owned company for its renewable energy business after receiving approval from NITI Aayog and the Department of Investment and Public Asset Management. NPTC targets 30% or 39 GW of its overall power capacity from non-conventional energy sources by 2032.
The SECI, Solar Energy Corporation of India implemented large-scale central auctions for solar parks and gave contracts for 47 parks with more than 25 GW combined capacity.
Under the CPSU-II scheme in the reverse binding auction, Vikram Solar clocked a 300 MW solar plant project worth about 250.39 million USD, about 1750 crore INR in April 2020 from NTPC, National Thermal Power Corporation Ltd.
It is worth highlighting that the Adani group aims to become the world’s largest solar power company by 2025 and the largest renewable energy company by 2030.
The Indian private companies invested more than 5.26 billion USD, about 36729. 49 crore INR from April to December 2019. ReNew Power and Shapoorji Pallonji will also invest about 0.11 billion USD, about 750 crore INR, in a 150 MW floating solar power project in Uttar Pradesh (19).
Initiatives of the Indian Government
The Indian government has made several initiatives to boost the country’s renewable energy sector. In December 2020, the Ministry of Power forayed into an MoU with IREDA, the Indian Renewable Energy Development Agency Ltd. The PSU under the Ministry of New and Renewable Energy offers its services SJNV for green energy projects.
Under the central government’s Make in India initiative, the Indian Air Force Station at Ladakh received the largest solar power project with a 1.5 MW capacity in November 2020. During the same period, India’s government also announced a PLI, Production-linked Incentive scheme worth about 610.23 million USD, about 4500 crore INR for high-efficiency solar PV modules manufacturing over a five-year duration.
A joint venture of PSU, the DNRE, Department of New and Renewable Energy, Goa, and the Ministry of Power. EESL, Energy Efficiency Services Limited signed a memorandum of understanding to discuss India’s first Convergence Project roll out in the state in November 2020.
The Indian government also announced a plan to set up an inter-ministerial committee under NITI Aayog to forefront research and energy modeling research. It is a steering committee that would serve the IEMF, Indian Energy Modelling Forum, jointly launched by NITI Aayog and the USAID, United States Agency for International Development.
The Indian government also announced its plans to offer land near its ports to organizations to build solar equipment factories in August 2020. Moreover, the country is also planning to add 30 GW of renewable energy capacity along a desert on its western borders, such as Rajasthan and Gujarat.
Delhi government shuts down its thermal power plant located in Rajghat and develops it into 5,000 KW solar parks. The Indian government is also implementing a 238 million USD National Mission on advanced ultra-supercritical technologies for cleaner coal utilization.
The MNRE, Ministry of New and Renewable Energy, has decided to offer custom and excise duty benefits to the solar rooftop sector, lowering the cost of setting up and generating power and boosting growth.
The Indian railway is also taking extra effort via sustained energy efficient measures and maximum use of clean fuel to reduce emission level by at least 33% by 2030 (20).
The Way Forward
The Indian government is committed to increasing clean energy sources and is undertaking several large-scale sustainable power projects. The country is also heavily promoting green energy.
Moreover, renewable energy has the potential to create huge employment opportunities at all levels, especially in the rural areas across the country.
The MNRE, Ministry of New and Renewable Energy, has set an ambitious target to set up renewable energy capacities to tune of 227 GW by 2022. Out of which, about 114 GW is planned for sola, 67 GW for wind, and others from bio, wind, and others.
Notably, India’s renewable energy sector is expected to attract huge investments worth about 80 billion USD in the upcoming four years. The country is also looking to set up more than 5000 compressed biogas plants across India by 2023.
There are expectations that by 2040, India would generate about 49% of the total electricity through renewable energy as it would use more efficient batteries to store electricity. The move would further cut the solar energy cost by 66% compared to the current cost.
The use of renewables in place of coal would also save India more than 8.43 billion USD, about 54,000 crore INR every year. Moreover, Renewable energy would also account for more than 55% of total installed power capacity by 2030.
According to the CEA, Central Electricity Authority estimates, India’s share of renewable energy generation would increase to 44% from 18% by 2029 to 2030 while thermal reduces t0 52% from 78%.