The estimated funding requirement for renewable capacity addition in line with Draft National Electricity Plan released by Central Electricity Authority (CEA) will be ₹12.5 trillion ($153 billion) during the 2027-32 period, a banker working with a public sector undertaking NBFC, who wished to stay anonymous, said in his analysis.

Nearly half of the funds — ₹6.62 trillion ($81 billion) – meant for renewable sources would be required to build 147 GW of solar capacity. Further, the inland and offshore wind capacity will need ₹2.79 trillion ($34 billion) and ₹1.75 trillion ($21 billion) respectively during the 2027-32 period.

Considering that debt will cover 75% of this cost, the financial institutions would be looking at a business of nearly ₹9.4 trillion ($115 billion).

However, the developers are expected to source the debt from multiple avenues including scheduled commercial banks, financial institutions, non-convertible debentures, external commercial borrowing, and loans from the World Bank, Asian Development Bank, kfW, and Export-Import Bank of India. Further, foreign equipment makers would also extend debt under buyers’ credit mechanisms.

Recently, RBI reported that lending to the renewable sector by scheduled banks had jumped by 113% year-over-year during April-November, 2022 period.

Additionally, the banker’s analysis estimate that the cost of a Battery Energy Storage System (BESS) required to complement the renewable capacity addition could be about half of the entire solar capacity addition at ₹3.44 trillion ($42 billion).

“Going forward, as the energy mix of the country is tilted more towards the variable, intermittent renewable energy sources, there is a need for the development of energy storage systems to maintain the grid stability. The estimates may increase with the creation of an additional 5-hour of BESS,” the banker said.

The banker further said that India has witnessed a moderate electricity demand increase of around 4.1% during the last decade and the peak deficit during the financial year (FY) 2021-22 has been 1.2% with the energy deficit at 0.4% only.

However, the electricity demand is expected to increase by 6% each year for the next decade, which underlines the need for massive capacity addition.

“The current installed capacity of 409 GW comprises capacities of 211 GW from fossil fuels, 25 GW from gas, and 163 GW from renewables which includes hydro. During peak demand, there is always a possibility that capacities made of renewable energy sources may not operate at the fullest capacity utilization factor,” the banker said.

All India installed capacity is expected to be 623 GW at the end of FY 2026-27, and 866 GW at the end of FY 2031-32 from an existing installed capacity of 409 GW as of October 30, 2022.

The United National Climate Change Conference COP27 estimated that $4 trillion worth of investment would be needed by 2030 to achieve net zero emissions by 2050.