STATUS OF RENEWABLE ENERGY IN INDIA AND A CASE OF FINANCING VIABILITY OF WIND ENERGY PROJECT

Abstract

Indian Power sector is in a period of transition, spurred by the governments’ mega target of installing 175 Giga Watt (GW) of renewables by 2022, the world's largest renewable energy capacity expansion plan, out of which 100 Giga Watt from solar and 60 Giga Watt will be from wind energy. India ranks fourth in wind energy, fifth in terms of renewable energy. India is the only country which have an exclusive ministry for renewable energy i.e. Ministry of New and Renewable Energy (MNRE). Renewable Energy Sources Installed capacity has grown substantially from 34 GW in 2014 to 87 GW in 2020. In recent years, the percentage of renewables has increased in total installed capacity. In 2013-2014, the contribution was 12.92%, rising to 23.5% by March 2020. Wind and solar energy are the major contributors in the enhanced capacity of renewables. Wind is one of the largest RE source in India, based on mean annual wind power density. States with high wind power potential are Gujarat, Tamil Nadu, Maharashtra Andhra Pradesh, Karnataka, Kerala and Madhya Pradesh. With an installed capacity of 37.69 GW (Mar 20) of wind energy, Wind Energy holds the major portion of 43% of 87.03 GW (Mar-20) total RE capacity among renewable and continued as the largest supplier of clean energy. India as a tropical country is blessed with good sunshine in most of its parts and the number of clear days of sunshine a year is also quite high. According to MNRE, India receives annually solar energy equivalent to more than 5,000 trillion units. Hot and dry climate of the country with about 300 days of sunshine; making this area a great place to harness solar energy. “Jawaharlal Nehru National Solar Mission (JNNSM)” was launched in 2010 to support the growth of solar energy installations in India. Government came up with many schemes time to time to make renewable energy sector attractive to investors. Few such schemes/ incentives are Viability Gap Funding for solar projects, Generation based incentives for wind projects, MAT credit for RE projects, Accelerated depreciation for wind projects, Must run for Renewable energy projects etc. Approx. Rs 2,14,800 Crores investments has been made in Renewable energy sector since 2014 till Jul-2019. Private, PSU banks, NBFCs, Development banks etc are lending debt to renewable energy projects. Many Private Equity players are participating in the equity financing of these projects. Indian Renewable Energy Development Agency Limited (IREDA), a government enterprise, was set up in 1987 under MNRE to support financial assistance to renewable energy projects. As per MNRE, country needs approx. Rs 4 Lakh Crores investment to achieve target of 175 Giga Watt of Renewable Energy Installations. Investments to this tune can only be made if it is a viable investment. In order to understand different viability parameters involved in the financing of renewable energy projects, a 100 MW wind energy project has been considered in this study. The project has a long term PPA at a tariff of 2.90 per unit for a period of 25 years. The estimated project cost (excluding Interest During Construction) is Rs 600 Cr to be funded in Debt : Equity ratio of 75:25. Financials have been worked out using excel tool. Financial modelling has been done to assess the viability parameters based on different assumptions. Further, to understand the risk factors involved in renewable energy projects, phase wise risk analysis has been done along with mitigation measures. Challenges have been explored to identify the gap in installation of renewable energy sources. Various recommendations have been suggested to overcome these challenges.