Indian Lenders To Boost Renewable Energy Finance By $15 Billion

The Indian Government is looking to ramp up financing for renewable energy projects as it looks to achieve large capacity addition targets.

Government-owned financial entities Rural Electricity Corporation (REC) and Power Finance Corporation (PFC) are expected to make available around $15 billion to renewable energy projects. The two companies are expected to provide loans to project developers are comparatively chapter rates than banks.

According to media reports, renewable energy lending currently consists of just 10% of the total disbursements made by PFC and REC, however this share is expected to increase sharply over the next few months, leading some to suspect capacity installation rates in the renewable energy sector may very well surpass that in the conventional power sector in India over the next few years.

The Indian Government has asked several state-owned entities to raised funds through bonds. Proceeds from these bonds are expected to be used to finance renewable energy projects. Recently, the Indian Renewable Energy Agency issued a fresh tax-free bonds issue and is expected to raise around $260 million. The Agency recently reported that it expects to disburse Rs 3,600 crore (US$550 million) in loans to project developers in FY2015-16, significantly higher than the total disbursement in FY2014-15 of Rs 2,600 crore (US$400 million).

At the end of November 2015, India had an installed renewable energy capacity of 39.5 GW. The government has announced plans to increase this to 175 GW by end of March 2022. Understandably, the government will require huge investments to achieve this highly ambitious target. With an installed solar power capacity of around 5 GW in 2015, India needs to add 95 GW capacity over the next 75 months. At the current capital cost of Rs 5 crore ($0.7 million) per MW, the total investment required would be a staggering $73 billion.