Green Sectors such as renewable energy, energy efficiency, and low-carbon transport, are helping drive economic growth in India, stated a new report by Climate Policy Initiative (CPI).
While launching the report, Dinesh Jagdale, Joint Secretary, Ministry of New and Renewable Energy (MNRE), said that, “a roadmap should be put in place for clean, secure, affordable energy supply in the RE sector that is essential for all global communities. We need to develop refinancing models by mobilising domestic and foreign sources of private capital.”
The CPI report, supported by Shakti Sustainable Energy Foundation, titled ‘Landscape of Green Finance in India’, is alone of a kind study that presents the most robust information on green finance in India.
It highlighted that, in total, green finance flows in India for FY 2017 were Rs 111 thousand crore (USD 17 billion) and Rs 137 thousand crore (USD 21 billion) for FY 2018. The total tracked green finance for the years 2016-18 amounted to Rs 248 thousand crore (USD 38 billion). This compares to an estimated USD 170 billion per year required for India to finance its climate actions, putting tracked green investments at an estimated 10 per cent of required investments across sectors.
“There is a need to differentiate between mature technologies, solar and wind, and those which may require handholding. To meet the goal of 450 GW, the full spectrum of renewable energies will need to be deployed in every sector. A 16-17 per cent compound annual growth rate (CAGR) is required to meet 2030 goals. It is a huge target, but the intent is very clear and positive,” Jagdale further added.
The report mentions that green investments outpaced India’s GDP growth during the study period. The GDP of India grew at an average rate of 7.2 per cent between 2016-17 and 2017-18, and the tracked investments suggest an increase of 24 per cent. Progress made by sector-dedicated PSUs such as the EESL, NTPC and BEE has been a game changer in increasing public investments in the energy efficiency. This indicates that green investments have the potential for driving economic growth of the country.
Mahua Acharya, Asia Director, Climate Policy Initiative, said, “The report shows the significant potential of renewable energy and other green technologies to fuel India’s economy. It is also encouraging to know that Government of India’s support to unlock private investment has helped, but we also see much more needs to be done.”
The total rooftop solar capacity reached 4 GW as of December 2018 with approximately 1 GW added in FY 2017 and over 1.5 GW added in FY 2018. Significant capacity additions indicate an increase in actual tracked investments despite the falling costs of solar and wind power.
In both years, 2016-2017 and 2017-2018, domestic private investors contributed the largest share (63 per cent and 51 per cent respectively) of about Rs 139 thousand crore through debt and equity, while public finance sources supported this investment through a variety of instruments. The domestic public green finance expenditure by the government and its agencies totalled Rs 71 thousand crore (~US$ 9 billion) for the two years. Government of India initiatives including the expenditure undertaken by the dedicated public sector undertakings (PSUs) on climate-related mitigation activities more than doubled from FY 2017 to FY 2018 while the budgetary allocations increased by 36 per cent.
The report highlights that the share of international public finance in tracked green finance remained nearly the same in both FY 16 and FY 17 at 10 per cent (Rs 12 thousand crore).
Debt, through project or corporate finance, was the largest financial instrument used to channel green finance, at an average of Rs 70 thousand crore/year during 2016-17, accounting for 54 per cent of the total tracked green finance.
Acharya added, “This report is ground-breaking in that it is an unprecedented benchmark of economic and financial progress toward a green future. So far, there is little to no comprehensive information available on how much of green finance went through the Indian economy. We very much hope that this study will help bridge this information gap.”
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