Investment in Indian RE Sector Doubled in Last 5 Years, Outshines Coal in 2018: CEEW-IEA Report

The investments in India’s renewable energy market have doubled over the period of last five years. At $20 billion in 2018, it exceeded the capital expenditure in the coal power sector.

The conclusions were issued in the latest report “Clean Energy Investments Trends 2019”, by the Council on Energy, Environment and Water (CEEW) and the International Energy Agency (IEA). Evaluating the risk perceptions of debt financiers towards solar photovoltaic (PV) and wind projects from 2014 to 2018. It also scrutinizes recent developments impacting the pace of capacity addition in India.

Further, it comprises a study of thermal power projects in order to evaluate the standing of renewables and thermal assets. The study also takes stock of the impact of a recent policy measure – the imposition of safeguard duties on solar PV cell and module imports – on the pace of project awards and the challenges facing the solar park model.

The report arises in the backdrop of the Economic Survey underlining that India’s additional clean energy investment necessity is nearly $80 billion till 2022, developing more than three-fold to $250 billion during 2023-30.

Significant Outcomes of the report:

• The reduced risk perception of debt financiers funding solar photovoltaic (PV) and wind projects in India has improved investments in renewables.
• In 2018, the top 10 firms accounted for over 80 percent of the sanctioned projects in both solar PV and wind energy markets in India. However, there has been a notable change in top players year-on-year, indicated by the churn rate. There were signs of increased consolidation in the wind sector in 2018 with the churn rate dropping to 50 percent from 90 percent in 2017. The churn rate in the solar sector remained at 60 percent from 2017 to 2018.
• A maturing market along with reduced risk perceptions and enhanced bankability for renewables has contributed to improved availability and pricing of project debt finance over time, facilitating lower cost investment. Interest rate spreads for both wind and solar PV declined between 75 to 125 basis points, indicating declining risk perceptions between 2014 and 2018. Loan tenures increased in the same period as lenders became more comfortable in extending longer-term loans.
• The imposition of safeguard duty on solar PV cell and module imports has led to an increase in tariffs at renewable energy auctions relative to 2017, resulting in the cancellation of 5GW of solar projects awarded in 2018.