The Government of India has set an ambitious target of adding 10,000 MW of wind energy every year, which is five times the total capacity addition in the previous fiscal. Besides, it is also working to ramp up the overall target for solar power generation to 100,000 MW by 2022 from the earlier target of 20,000 MW. Tax incentives that include accelerated depreciation and generation based initiatives have been reinstated this year. Efforts are on to ensure viability of solar energy projects by enabling grid parity and also providing assurance of bankability and returns. According to government projections, India is expected to receive investments of around US$ 100 billion in the renewable energy space in the coming four years.
Buoyed by the strong impetus being provided to the clean energy sector by the Government of India, industry is showing firm intent towards long term investments in this space. Companies are exploring all possible sources for funds - be it initial public offerings (IPOs), debt instruments or foreign investment. According to inputs by experts in the sector, wind energy companies are looking to raise funds between Rs 5,000-6,000 crore while Indian Renewable Energy Development Agency (IREDA), the government owned financing entity for the renewable energy sector, is planning to raise around Rs 3,000 crore via an IPO. As wind energy projects reach gigawatt scale, PE exits are also likely, which are expected to lead to 5-6 big ticket IPOs in the sector in the next five years.
It must be noted that the country has enormous potential in both wind and solar energy. By the end of October, 2014, India’s renewable energy capacity had reached 33 GW. Around 70 per cent of this capacity is accounted for by wind energy (22.1 GW). This is followed by biomass (4.2 GW), small hydro power (3.9 GW) and solar power (2.8 GW). India has the potential to add 145 GW of solar power capacity by 2024. The average intensity of solar radiation received by India is 200 MW per sq km and the country gets around 70 per cent more solar radiation than European nations. With conventional fuels like coal getting expensive, solar has a bright future in India. The levelised cost of energy (LCOE) from solar is currently at par with the cost of energy from imported coal. While the latter is projected to grow at a CAGR of 12 per cent over the next 10 years, LCOE for solar energy is expected to correspondingly drop at a CAGR of 4 per cent and even match LCOE of power plants based on domestic coal by 2019.
India is the fifth largest producer of wind energy in the world and still has a huge potential to leverage. Estimates by the Indian Wind Energy Association project the potential of wind energy for electricity generation at around 102 GW. In this milieu, the aggressive intent being shown by the government and the industry in the clean energy sector is expected to greatly improve India’s energy mix and reduce dependence on conventional fuels in the coming years.