ACCELERATING TRANSITION TO RENEWABLE ENERGY IN INDIA: By Infusion of Capital
A transition to renewable energy is taking place in India and for it to be accelerated, there has to be an infusion of capital, which requires reducing risks, transaction costs, and enabling large-scale replication. These were some of the points discussed by experts at a special session on ‘Energy Transitions: Reconciling Competing Imperatives of Development and Environmental Sustainability’. The session was held on September 25, 2018, at Climate Week NYC on the sidelines of the United Nations General Assembly.
Dr Ajay Mathur, Director General, TERI, and co-chair, Energy Transitions Commission (ETC), who chaired the session, said, “You need private capital as well as public capital and public capital needs to be more risk-taking, while risks have to be reduced for private capital.”
“While it has to be ensured that costs remain low so that power is affordable, there also have to be returns that attract investors. Amid the rapid development taking place, more than half of the India of 2030 is yet to be built. This means that it can be done in a sustainable manner to balance development imperatives with the need to tackle climate change,” he added.
India’s political leadership has repeatedly reaffirmed a commitment to climate action, and to the Paris Agreement. This is driven by the country’s own imperative of ensuring energy security and the need to save the environment. “India targets 175 GW of renewable capacity by 2022 (or 20%–22% of generation), and 265 GW by 2027. For reducing risk to investments in renewable energy, what is required are timely payments, agreements that are in place and honoured, and a financial structuring that allows the kinds of returns that make it profitable,” Dr Mathur said.
Ms Rachel Kyte, CEO of Sustainable Energy for All and Special Representative of the UN Secretary-General for Sustainable Energy for All, said in her keynote address that “there was no longer a dualistic view that looked at development and environment in opposition to each other. Individuals should be at the centre—they want clean air, safe medicine, healthy food, and these are the priorities—and India is moving in the right direction. While the use of electric vehicles and greater use of electricity is being promoted, there is an underlying ‘thermal economy’ when it comes to power generation and manufacturing,” she said.
Mr Remy Rioux, CEO, Agence Française de Développement (AFD) and Chairperson for International Development Finance Club (IDFC), said that the private sector has to work with development banks to get adequate capital. Development and climate action cannot rely entirely on overseas development aid, even with the efforts of leaders, such as the French President Emmanuel Macron increasing the aid given by their countries, he said. Mr Rioux said other alternatives for financing for the UN Sustainable Development Goals and climate action have to be created.
Mr Sumant Sinha, Chairman and CEO, ReNew Power, said that “Transition will become a revolution as it reaches sectors beyond power generation. But there is a need to create capital for the transition and, at the moment, the capital is not following to the sector to the extent needed. Investors need returns and are risk averse, he noted. Due to the huge potential that the renewable energy sector has, its listed stocks should be trading at the rate of e-commerce stocks. However, the markets do not buy into it because they are not sure of the policies and, therefore, of the risks. One of the problems in scaling up renewable energy production is that power tariffs are reduced each time there is an increase in production, which in turn inhibits increase in capacity. If there was a certainty in the tariffs and they held steady, there would be a much larger increase in renewable power generation capacity.”