Distributive policy

Political support, low-cost capital essential to India’s renewable energy goals: Moody’s

NEW DELHI : India will need political support from the government and low-cost capital to meet its ambitious carbon reduction targets, according to a report by Moody’s Investors Service.

He noted that a significant shift in India’s energy mix towards renewables will play a key role in achieving the country’s medium and long-term emissions reduction targets.

The main driver will be the competitiveness of wind and solar generation against coal-fired power generation due to technological developments, supportive government policies and private sector participation, he said. Improving the economics of storage solutions for renewables would provide further impetus.

Access to low-cost, long-term capital from the public and private sectors will be essential to achieving these goals.

“Renewables will play an important role in achieving India’s net zero targets. The Indian government’s plan to achieve net zero emissions by 2070 depends on a shift in the energy mix from the current predominantly coal-fired electricity to clean, renewable energy,” the Moody’s report states.

By 2030, India aims to increase its renewable energy capacity to 500 GW from 157 GW in March 2022 and to have 50% of electricity generation from non-fossil fuel sources (24.8% in fiscal year 2022).

Supportive government policies are a prerequisite for significant and continued growth in renewable energy capacity, he said, adding that with India’s goal of more than tripling its energy capacity renewable by 2030, continued government policy support is essential. Over the past 4-5 years, India has significantly expanded its renewable energy footprint and this has been helped by supportive government policies that have encouraged the domestic private sector and foreign investors to participate in the sector.

Additionally, access to low-cost, long-term and diversified capital will determine success in meeting the 2030 renewable energy targets. over the next eight years to meet its 2030 goals, and a key driver for achieving those goals will be access to low-cost, long-term capital, Moody’s said.

India’s private sector has led the way in terms of renewable energy investment by contributing more than 90% of installed renewable capacity, excluding hydropower, he said, adding that funds Sovereigns, which generally have a low cost of funding, have been active in the sector.

According to the report, private and public sector contributions will be needed to reach the 2030 target of 500 GW of renewable energy capacity.

“The weak financial profile of public distribution companies remains a major challenge. While policymaking on renewables and net zero targets will be driven primarily by central government, the main challenge remains electricity distribution given the poor financial profiles of state-owned distribution companies,” said he declared.

According to Moody’s Investors Services, delays in receiving payments from public distribution companies are common, and the poor financial situation has also contributed to non-compliance with renewable energy purchase obligations.

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