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India expanding investments in renewables after 2020 decline

Investments in renewable energy in India are rising after a 2020 decline that resulted from the impact of the pandemic on the global economy, according to the Institute for Energy Economics and Financial Analysis (IEEFA).

IEEFA states that renewable energy investors committed $6.6 billion in the first four months of 2021, up from $6.4 billion invested in the same period the previous year. If the momentum continues, IEEFA forecasts 2021 investments to overtake last year’s $8.4 billion.

Vibhuti Garg, Energy Economist Lead, India at IEEFA, said: “Rebounding energy demand and a surge of commitments from banks and financial institutions to exit fossil fuel financing are helping to drive investment into Indian renewable energy infrastructure.”

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A briefing note released by IEEFA highlights the 30 biggest deals that are having a significant impact on the Indian renewable energy market since 2020. Acquisition deals hold a lion’s share of the capital that flows into the market, according to IEEFA.

The largest of the deals include:

  • SoftBank’s exit from the Indian renewables market in May 2021 with a $3.5 billion sale of assets to Adani Green Energy Limited. With this acquisition AGEL became a major investor, as well as the world’s largest solar developer.
  • ENGIE’s acquisition by Edelweiss Infrastructure Yield Plus for $550 million.
  • Acme’s acquisition by Scatec Solar for $400 million.

In addition to acquisition deals, green bonds and mezzanine funding are also playing a huge role in the increase in renewable energy investments in India, according to the briefing.

Saurabh Trivedi, co-author of the briefing and research analyst at IEEFA, adds: “Green bonds have become a key financial instrument for mobilising cost-effective foreign debt capital into the Indian renewables market. Since 2016 Indian corporates and financial institutions have raised around $14.43bn through green bonds as per Bloomberg New Energy Finance (BNEF) data. In 2021 to-date, Indian companies have attracted $4bn in green bonds, already beating the previous record of $3.43bn in cumulative green bond issuance in 2017.”

Examples of huge green bonds raised by Indian companies include ReNew Power‘s in April 2021 and a $414 million bond raised by Azure Power Global in August 2021, according to Trivedi.

Other factors driving the increase in renewables investments in India include the government’s announcement that it plans to redouble its efforts in renewable energy to secure energy supply and self-reliance.

Corporates in India have also shifted their focus to clean energy to decarbonise their operations.

In addition, the lending portfolios of Indian financial institutions like State Bank of India (SBI) and Power Finance Corporation (PFC) now include more renewable energy assets than fossil fuels, a trend which has picked up significantly in the last one to two years, according to the note.

Despite the positive developments within the Indian sector, investments being made are far short than required for the country to meet carbon emissions reductions targets.

The country requires an additional $500 billion in investment in new wind and solar infrastructure, energy storage and grid expansion and modernisation to reach 450GW of capacity by 2030.

Today, India is investing between $18 billion and $20 billion in energy generation capacity and a further $20 billion in the grid per annum. The International Energy Council recommends India triple its annual investment in renewable energy to achieve sustainable development goals.

Vibhuti Garg, Energy Economist Lead, India at IEEFA, reiterates: “The financial trends in Indian renewable energy and grid infrastructure over the last two to three years strongly suggest domestic and global capital can support this ambition.”

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