Who will finance clean energy?

Renewable energy is emerging as the mainstream source of energy globally; it does not remain merely an alternative source of energy. Last couple of years have been excellent for renewable energy sector globally. We witnessed many developments that have a bearing on clean energy, including a decline in global fossil fuel prices, significant power capacity addition, and a historic climate agreement in Paris that brought together the global community to focus on generating more power through renewable sources. These include commitments made by countries while adopting Sustainable Development Goals and Habitat III to accelerate access to renewable energy and to advance energy efficiency. The SDG-7 talks about ensuring Sustainable Energy for All by 2030.

With its commitment to generate 175GW energy from renewable sources, India has emerged one of the countries that will invest hugely in renewable energy. Apart from nonavailability of advanced technological tools, ensuring availability of adequate funds for executing the RE projects could be a matter of concern for the government.

As per the National Electricity Plan-2016, the total fund requirement is estimated to be Rs 10,33,375 cr. This expenditure includes expenditure requirement for the renewable capacity addition during the period 20172022, as well as the expenditure done during this period for the projects coming up during the years 2022-27. The fund requirements have been assessed based on assumptions of cost per MW for various types of generation projects, based on present day costs and yearwise phasing of expenditure in accordance with the normal scenario.

Installation of renewable energy project is capital intensive and pay backs from such projects could be slow. To attract investment and give a push to the renewable power generation in the country, the Government has allowed 100 per FDI in infrastructure sectors, which includes power. Benefits under the Income Tax Act which allows tax exemption for 10 years is another incentive for infrastructure companies. To promote solar power generation, the importation of solar modules is duty free.

According to the Ministry of New & Renewable Energy, the country attracted Rs 90,841 cr (around $14 billion) over the last 3 financial years (FY 2013-14, 2014-15 and 2015-16) in renewable energy investments. It is also reported that the government provided financial incentives worth Rs 6,541 cr (around $1 billion) during the same period. This financial support includes capital cost support for setting up projects, as well as generation-based incentives for power generation.

To support the energy sector and achieve target without facing any financial difficulty, the government through the Indian Renewable Energy Development Agency Ltd (IREDA) help desks in different Indian cities will help investors to get over operational difficulties in setting up renewable energy projects in the country. According to the Minister of Renewable Energy Piyush Goyal, “I see in the next 5-6 years a $250 billion opportunity in the energy sector and by 2030, when we are planning to expand renewable energy also very significantly, I see a trillion dollar investment opportunity in India.” If India has to attract such a huge investment, the policy regime of distribution companies, co-ordination with state governments and other involved agencies, and infrastructure requirements must be taken care of.