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Moody’s – Policy support and low-cost capital key to India meeting renewable energy targets – EQ Mag Pro

Moody’s – Policy support and low-cost capital key to India meeting renewable energy targets – EQ Mag Pro

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Government support to encourage the private sector and overseas investors to participate in renewables is key

The country will need $225 billion-$250 billion in investment from both private and public sectors to meet its 2030 renewable energy target

India’s plan to reach net-zero emissions by 2070 will depend on a shift in its energy mix toward renewable energy, enabled by supportive government policies, private sector participation and low-cost capital, according to a new report by Moody’s Investors Service.

“The country aims to triple its renewable energy capacity to 500GW by 2030 from 157GW as of March 2022, and to have 50% of the electricity generation from non-fossil fuel sources. The key enabler will be the competitiveness of wind and solar generation over coal-fired power generation because of technological developments, supportive government policies, private sector participation,” says Abhishek Tyagi, a Moody’s Vice President and Senior Credit Officer.

Continuous policy support from the government is key – the country expanded its renewable energy footprint significantly over the last 4-5 years because of supportive government policies that encouraged the domestic private sector and overseas investors to participate in the sector.

In addition, access to low-cost, long-term and diversified capital from both private and public sectors will determine India’s success in meeting its 2030 renewable targets. The country will need $225 billion-$250 billion in investment over the next eight years to meet its goals. The private sector has led the way in investing in renewable energy, having contributed over 90% of installed renewable capacity (excluding hydropower). And sovereign wealth funds, which typically have a low cost of funding, have been active in the sector.

The weak financial health of state-owned distribution companies will remain a challenge for India’s renewable energy sector. Payment delays to these companies are common, leading to a build-up of receivables from off-takers and an increase in working capital debt for renewable energy companies. The weak financials of state-owned distribution companies have led to delays in the signing of PPAs, which in turn occasionally result in project delays or cancellations.

Anand Gupta Editor - EQ Int'l Media Network