For India, the success of the renewable energy sector will be crucial to meet its Nationally Determined Contribution (NDC) under the Paris Agreement and its transition towards a sustainable future.

• In its NDCs, India has committed to reducing its greenhouse gas emissions intensity by 33 to 35% of 2005 levels, to achieving 40% of its installed electric power capacity from non- fossil sources by 2030.
• Simultaneously, India has set an ambitious domestic target of 175 GW of renewable energy by 2022.
• The National Electricity Plan 2018 reaffirms further expansion to 275 GW by 2027.
• Undoubtedly, this is significant departure from business as usual and would entail a new paradigm with support mechanisms, facilitative policies and access to new technologies and investment.
• As part of national efforts, India has embarked on an intensive renewable energy programme that covers a basket of applications including grid power, off-grid power, modem cooking energy, thermal application in industry and many more.
• Over the period, renewable energy has emerged as a true multi-benefit system, combining ecological necessities wWith domestic priorities and economic opportunities.
• It addresses the complex challenges of energy security, energy access, demand and domestic job creation.
• India is well on the way to realise the ambitious target Of 175 GW by 2022.
• The policy landscape for renewable energy deployment is ever evolving in response to felt needs.
• The renewable energy projects are mostly being implemented in the private sector.

The steps taken by the government to support the renewable energy sector:

• Fiscal and promotional incentives, such as capital subsidy, guidelines for transparent bidding process
• Waiver of Inter State Transmission System (ISTS) charges and losses
• Viability Gap Funding (VGF)
• Standards for deployment of renewables systems and devices
• Permitting Foreign Direct Investment up to 100% under the automatic route.
• By the year 2022, the renewable power share in the overall electric installed capacity is expected to reach 37%, if large hydro is included, the share of non-fossil fuel electric installed capacity in the mix would be around 48%.
• Over the period India has a favourable investment destination for renewables.
• A variety of investors finance renewable energy projects in India, including institutions, banks and registered Institutional investors are either state-owned, or bilateral and multilateral institutions.
• Development Banks, like Indian Renewable Energy Development Agency (IREDA), continue to represent a key source of funds for renewables, particularly in project finance.
• The very liberal foreign investment policy allows foreign investors to enter into joint ventures with an Indian partner for financial and/or technical collaboration and for setting up of renewable energy- based power generation projects.
• The Indian renewable energy sector received approximately US $3.2 billion in the form of

Financial assistance in the form of low-interest rate, long-term loans and loan guarantees are globally accepted means to address the high up-front capital costs of renewables. In this context, arranging institutional finance for increased renewables deployment would require concerted efforts. Gearing up the banking sector, exploring international funding, and developing a suitable mechanism for risk mitigation or sharing by addressing both technical and financial bottlenecks is a challenge.

The major areas for action are:

1. First, pension or sovereign funds are potent sources for patient capital for renewables.
   • Green bond issuance has surpassed US $120 billion.
   • Even a small portion of proceeds from these funds could easily meet the investment required for renewables over a decade, assuring a constant and low risk yield investments are also growing, albeit slowly.
   • From the year 2017 onwards some of the wind companies have been successful in raising funds to expand their operations.
   • IREDA have raised US $300 million through the issuance of Green Masala Bonds. The finance landscape for the energy sector is undergoing significant changes. With renewables, in many situations out competing other energy technologies, the financial markets have started repositioning themselves for a fundamental shift towards renewable that simultaneously makes our planet green.
   • In 2014, the Securities and Exchange Board of India (SEBI) introduced Infrastructure Investment Trusts (InvITs). The feedback from industry suggests that due to the current limitation of 49 per cent cap on leverage, InvITs are unable to offer adequate returns in comparison to alternative investment avenues with similar assets.
2. Second, reducing cost of the foreign debt by reducing the currency hedging cost has potential to mobilize foreign capital and spur investment by reducing the cost of the capital. This would reduce the delivered cost of renewables and make them more competitive.
3. Third, robust Payment Security Mechanism (PSM) will also contribute to de-risking the investment.
   • Successive studies have confirmed that one of the most important risks to the Indian renewable sector is the counterparty credit risk, associated with the risk of state-owned utilities delaying or defaulting on their contractual payments to power producers.
   • The timeliness and reliability of payments for power purchase by state distribution companies remains a persistent risk for investments.
   • The National Solar Mission has PSM for ensuring payment to the developers in case the distribution company falters in payment.
   • Putting in place a well-structured PSM helps in lowering the Off- takers risk and increasing investment attractiveness.
4. Fourth, absence of dedicated ecosystem that looks at the financing needs of the renewables in most of the bilateral and multilateral financing institutions.
   • In furtherance to the policy of building financial frameworks for sustainable energy the banks may consider to earmark a certain percentage of their loan portfolio for renewables. This will be a critical factor for unlocking significantly scaled-up investment in renewables.

Conclusion:

Given right instruments put in place, there is no dearth of funds for renewables investment. India has put in place several progressive policies, both at federal and state level. However, financing challenges are bound to continue given the ambitious targets and requirement of patient capital. India has rightly been exploring a combination or short and long-term policy solutions. New ways of financing renewables including through credit and risk guarantees, innovative currency hedging facilities, government bonds etc would help in attracting additional capital, lowering the cost of debt, and also ensuring that India achieves its renewable energy targets.