New Delhi, July 19, 2019 : The reduced risk perception of financiers funding renewable energy projects in India resulted in investments in the sector doubling over the last five years, according to a joint study released today by the Council on Energy, Environment and Water (CEEW) and the International Energy Agency (IEA). The report – the 2019 ‘Clean Energy Investment Trends’ – was released at CEEW’s flagship conference – Energy Horizons 2019 held in The Hyatt Regency, New Delhi.
The report maps out the evolution in the renewable power industry and investment landscape through tracking the risk perceptions of debt financiers towards solar photovoltaic (PV) and wind projects over the period from 2014 to 2018. The report also highlights recent developments impacting the pace of capacity addition. According to the report, investment in India’s renewable power sector has doubled over the past five years. At nearly USD 20 billion in 2018, it has surpassed capital expenditure in the thermal power sector. Ambitious targets, supportive policies, and falling technology costs have improved the attractiveness of financing utility-scale solar PV and wind projects. By May 2019, utility-scale installed capacity of solar PV was over 27 GW and wind was more than 36 GW.
In terms of the industry landscape, while market concentration in the solar PV and wind sector remains high, there has been a notable change in top players from year to year, indicated by a measure known as the churn rate. Even the best developers face limitations in continually financing projects. Increased consolidation in the wind sector was observed in 2018 with the churn rate dropping to 50 per cent from 90 per cent in 2017. The churn rate in the solar PV sector remained at 60 per cent from 2017 to 2018.
The analysis reveals five key trends:
Dr Arunabha Ghosh, CEO, CEEW, said, “CEEW-CEF aims to help deepen markets, increase transparency, and attract capital in clean energy sectors in emerging economies. Responding to a growing need for enabling an efficient and timely energy transition in emerging economies, CEEW-CEF will focus on developing fit for purpose market responsive financial products.”
Commenting on the launch of the report and the CEEW Centre for Energy Finance (CEF), Kanika Chawla, Director, CEEW Centre for Energy Finance, said, “The cost and availability of financing, which depend on the investment risks as perceived by developers and financiers, significantly shape India’s progress along the energy transition. The top companies that can access financing at favourable terms usually have an advantage in winning project capacity at competitive auctions. Several emerging markets are now seeing renewable energy markets of significant scale. However, these markets are young and prone to challenges that could inhibit or reverse the advances made in the recent past. Also, the absence of well-functioning markets in emerging economies make investment in clean technologies risky and prevent capital from flowing from where it is in surplus to regions where it is most needed. CEEW-CEF will address the urgent need for increasing the flow and affordability of private capital into clean energy markets in emerging economies.”
CEEW-CEF has a twin focus on markets and solutions. CEF’s market analysis will cover energy transition-related sectors, both on the supply (solar, wind, energy storage) and demand side (electric vehicles, distributed renewable energy applications). It will create open source data sets, salient and timely analysis, and market trend studies.
“Financing India’s energy future requires policy makers to better understand the risks faced by investors and design measures that allow for the efficient allocation and management of these risks, key determinants of the cost of capital, which is becoming more critical for investment decisions,” said Michael Waldron, Senior Energy Investment Analyst at the IEA. “As the investment environment for renewables matured, the private sector has responded, but more effort is needed to address persistent risks pertaining to infrastructure, policy uncertainty and the financial viability of distribution companies.”