supporting India’s renewable energy strategy (1) – Deutsche Bank #IndiaFinance

India, the world’s most populous country, is its third-largest consumer of energy and is in transition from a mainly thermal energy-based economy to one centred around renewable energy. This shift has not only been driven by its commitment to achieve net zero by 2070 under the Paris Agreement,¹ but the government’s commitment to attain at least 50% (around 500 gigawatts (GW)) of cumulative electric power installed capacity from non-fossil fuel-based sources by 2030.²

The country has set about reaching its goals via policy, government expenditure and various targeted initiatives. “India’s total electricity generation capacity has reached 452.69GW, with renewable energy contributing a significant portion of the overall power mix,” stated India’s Ministry of New and Renewable Energy (MNRE) on 13 November 2024.³ “As of October 2024, renewable energy-based electricity generation capacity stands at 203.18GW, accounting for more than 46.3% of the country’s total installed capacity. This marks a major shift in India’s energy landscape, reflecting the country’s growing reliance on cleaner, non-fossil fuel-based energy sources.”

This article sets out the background to India’s renewable energy journey and explains the renewable energy project life cycle and structure. This should be read in advance of the second article covering the financing of renewable energy projects, ‘REC: financing India’s renewable energy strategy (2)’.

“Building renewable energy projects is always a capital-intensive undertaking”
Gaurav Khurana, India Sales Head – Trade Finance and Lending, Deutsche Bank

The MNRE anticipates that most ongoing investment will come in the solar and wind sectors – as a tropical country, India is one of the best recipients of solar energy and it estimates the country’s potential at around 748GW, assuming 3% of India’s waste land is covered by solar photovoltaic (PV) modules. “From an energy security perspective, solar is the most secure of all sources since it is abundantly available. Theoretically, a small fraction of the total incident solar energy (if captured effectively) can meet the entire country’s power requirements,” it reports.

Building renewable energy projects is always a capital-intensive undertaking, and private power companies would soon run out of balance sheet capacity if all the projects they sponsored were taken to their own balance sheets, explains Gaurav Khurana, India Sales Head – Trade Finance and Lending at Deutsche Bank. But the Indian government’s involvement in each step of the value chain – by acting as an offtaker, a distribution company (DISCOM) and support provider – means it sets out to absorb risk in the ecosystem and thus encourage private power producers to participate in the renewable energy market with reduced risk. Additional incentives are provided through a combination of policy frameworks such as the National Solar Mission (from the MNRE), and other state and central agencies such as the Solar Energy Corporation of India (SECI)⁴ that are instrumental in driving renewable energy auctions and capacity additions.