With an increase in thrust towards renewable energy, about 17.5% of total power capacity in India is through green energy sources. In the years to come, the ratio is only going to rise, but investment remains among the top concerns for the increasing electricity generation from cleaner sources.
Within the renewable sector, wind energy dominates with a share of 56%, followed by solar with 22%, said a report by Care Ratings on the power sector.
India with 3,200 km of coastline and Tropic of Cancer passing through the centre of the country, there is ample opportunity for more solar and wind farms to be set up.
According to International Renewable Energy Agency’s (IRENA) latest report “Remap Renewable Energy Prospects For India”, India has an estimated renewable energy potential of about 900 Giga Watt (GW) from commercially exploitable sources (1,000 GW when large hydropower is included).
“It is endowed with very good solar energy potential. Most areas receive on average 4-7 kWh/m2/day of solar irradiance. Assuming 3% of the country’s wasteland is available for it there is a solar power potential of 750 gw,” read IRENA’s report. Similarly, there is a potential of 102.8 GW for wind power.
According to Ministry of New and Renewable Energy (MNRE) estimates, the annual potential for biomass-based electricity is at 18 GW, generated by 120–150 million tonne of agricultural and forestry residues. There is also about 5 GW of possible power capacity from bagasse-based cogeneration in sugar mills.
Hydropower’s potential, including small and large plants, is 20 GW.
There is also a scope of just four countries of the world including India (other countries being Brazil, China and US) may be able to account for half of global use of renewable energy by 2030.
Despite such a huge potential, IRENA states that there are major challenges in India bogging the sector one of which is getting investment, high upfront costs and uncertainty of revenue generation, etc.
However, according to CARE Ratings, more financiers and sponsors especially private equity funds and pension funds are likely to invest in completed renewable energy projects which would provide an exit to developers. The renewable segment would have to access innovative ways like green bonds, climate bonds etc for their capital requirements.
“Financial institutions, especially banks, would fall short of contributing towards funding the huge renewable energy target, i.e. $600 billion in the next 10 years, with mounting NPAs and bail-out of discoms being given higher priority,” read the report outlook.
In the ongoing fiscal, there is a possibility of foreign direct investment increasing further as more projects in solar and wind near completion.