IEEFA: India's renewable energy sector attracts $10-20 billion in investment

IEEFA, India's Institute for Energy Economics and Financial Analysis, said in a new briefing that while the growth rate of renewable energy in India has slowed, the positive results of recent auctions show that there is still a strong
demand from domestic and foreign investors to build renewable infrastructure.

Policies and the collapse in electricity demand due to the Covid-19 crisis have disrupted India's renewable energy capacity tendering and commissioning process
.

Kashish Shah, a researcher at IEEFA, said that despite these setbacks, renewables have proven to have the resilience
of investment capital available for new projects with favorable risk-return characteristics.
This is the result
of seven renewable energy capacity and storage auctions held so far in 2020.

The report found that despite the pandemic, they still attracted about $10 billion to $20 billion in investment commitments
.
Among them, the 2 GW solar auction conducted by the Solar Energy Corporation of India (SECI) in June was a particular highlight
.
It delivered India's lowest renewable electricity price to date at 2.
36 rupees/kWh ($31/MWh)
at a 25-year index price.

Developers from all over the world won the winning bids: Solarpack (Spain), Enel (Italy), Amp Energy (Canada), Eden Renewable Energy (France), IB Vogt (Germany), Ayana Renewable Energy (backed by CDC Group in the UK), ReNew Power (India, but backed by ADIA Abu Dhabi, CPPIB Canada, JERA of Japan and Goldman Sachs in the US).

"The cost competitiveness and continued price decline of renewables make them more dynamic energy producers
compared to many existing thermal power plants and all new imported power plants," Shah said.
”

"Both domestic and global investors have noted lower renewable energy prices, coupled with the government's clear policy orientation and ambitions, which is reflected in the very positive results of these recent auctions
.
"

The recent decline in electricity demand is hitting India's power distribution companies (discoms), exacerbating the sector's structural and financial problems
.
By July 2020, state-owned power distribution companies had accumulated about $15 billion in overdue payments to power producers across India, creating a huge liquidity crunch
in the sector.

"When demand collapses, distribution companies are reluctant to even sign new power purchase agreements (PPAs)
that are particularly low-cost," Shah said.
SECI has been working hard to sign PPAs with power distribution companies as it has auctioned 6GW of renewable energy capacity
.
”

The biggest loser of the collapse in electricity demand will be the thermal power sector, which has high marginal production costs and a lack of flexibility
.
"The encouraging results of these auctions show strong investor interest
in renewable energy in an extremely difficult economic environment.
Currently, there is more
money than opportunity to invest in renewable energy in India.
With the right policy environment, India's renewable energy sector will continue to attract both international and domestic investment capital
.
”

A green stimulus could accelerate India's investment in renewable energy infrastructure and help India emerge from the downturn
by increasing jobs, reducing fossil fuel imports and enhancing energy security.