Mercom India conducted a series of exclusive interviews with top executives from the renewable energy sector and government agencies, bringing out their insights on the industry and the way forward.

Here is a look back at some impactful interviews covering the renewable energy loan landscape, DISCOM performances, green bonds, project financing, and the impact of the suspension of the Approved List of Models and Manufacturers regulation on the solar sector.

Renewable Loan Portfolio Expansion: REC Limited

In an exclusive interview with Mercom India, V K Singh, Director (Projects) at REC Limited, discussed the role the government-owned infrastructure finance company aims to play in achieving India’s ambitious 500 GW renewable energy target.

He elaborated on the opportunities and challenges in funding renewable energy projects and the way ahead.

Talking about the expansion of the renewable loan portfolio at REC, he said, “In our loan book of ₹4.75 trillion (~$56.99 billion), renewable energy stands at around 6% of our outstanding loan book. This is where a major change will happen. We are going to play a significant part as far as energy transition is concerned. We want to increase our total loan book size to about ₹10 trillion (~$119.99 billion) by the end of 2030. We target 30% of it from green projects, including e-mobility projects. A paradigm shift will happen there, and our loan book from green projects will increase substantially from 6% to 30%. However, largely, the exposure will remain within Indian territory.”

Improving DISCOM’s Financial Status: PFC

Stricter regulations around financing have been one of the driving factors behind the considerable improvement in the otherwise sluggish performance of state distribution companies (DISCOMs), said P K Sinha, ED Projects at Power Finance Corporation (PFC), in an exclusive interview on the sidelines of the Mercom India Renewables Summit 2023.

In the interview, he talks about the monitoring process PFC undertakes to ensure DISCOM’s performance stays up to mark.

He said, “We monitor the RDSS (Revamped Distribution Sector Scheme) program that is presently under implementation and the loss reduction trajectory agreement the utility has signed with the government. We frequently emphasize the contracts that have been signed between the DISCOMs and other different agencies. The DISCOMs must sign a trajectory agreement promising a definite reduction in AT&C (Aggregate Technical and Commercial) losses and the ARR-ACS (Average Realizable Revenue-Average Cost of Supply) gap. This is then monitored and evaluated every quarter by the Ministry in a review meeting that lasts for two days. The minister and senior officers interact with the utility heads to identify challenges and ways to improve their performance.”

Under RDSS, grants worth ₹3.3 trillion (~$40.35 billion) will be disbursed to state DISCOMs for energy efficiency. Sinha talks about the new clause the Indian government has now placed for the DISCOMs to reduce their AT&C losses to 12% from 15% to be eligible for these funds. If the efficiency parameters aren’t achieved, the grants are converted into loans, which has made the utilities more vigilant.

He claimed that with heavy penalties coming into the picture, DISCOMs have improved their payment mechanism over time, benefiting the power generators in the process.

Green Bond Market and Renewables: Chintan Shah

As India strives to achieve its non-fossil-based energy target of 500 GW set for 2030, the funding is going to be supported by the green bond market and not just the term lending, Chintan Shah, Renewable Energy Expert, commented on the sidelines of the Mercom India Renewables Summit 2023.

He added that defining green bonds will help measure them and set up a long-term bond market, thus driving investments into the sector.

According to him, one solution to deepen the corporate bond market could be to follow other countries and define a green taxonomy. He said, “We need to clearly determine what qualifies as ‘most green,’ ‘relatively green,’ and ‘medium green.’ Renewables fall under ‘most green’ since they are measurable. People can then issue long-term bonds on green assets, and institutional capital, such as mutual funds, Life Insurance Companies, General Insurance, Employee Provident Funds, etc., can be mandated to set aside 1% of their AUM (Assets Under Management) to subscribe to these bonds and this is how we create a market. The total debt required until 2030 ranges from ₹24 trillion (~$292 billion) to ₹30 trillion (~$365 billion), depending on various estimates. This amount cannot come from term lending alone, and we need a combination of term lending from banks and NBFCs and the bond market to meet this need. We need to parallel this transition in the financial sector, or problems could arise.

Better Returns on Renewable C&I Projects Than Utility-scale PPA Portfolios: SBI

Hitesh Paliwal, Senior VP & Zonal Head, North Zone Corporate Banking Group at SBI, in an interview with Mercom India, spoke about how lenders are more receptive to funding renewable transactions, encouraging corporates striving towards a carbon-neutral environment and adding value to their brands.

Paliwal added that even though we are in the early stages of the journey toward renewable targets, we are progressing in the right direction, and the sectors will mature down the line.

He said, “The C&I sector is more granular, with numerous counterparties, but we have found that the selection criteria of independent power producers installing C&I projects is very good. They tend to select better-rated companies with an impeccable track record of payment and contract fulfillment. So far, every C&I operator we have interacted with is thrilled about the exposure to this sector and the track record. Payment can sometimes be a struggle when dealing with authorities and other intermediaries. However, having a strong counterparty with a proven payment and contract fulfillment track record significantly reduces risk. No borrower has mentioned losing a single penny in a renewable contract. Regarding return on assets, equity, or capital, C&I projects yield better returns than utility-scale portfolios of PPAs (power purchase agreements).”

Impact of the ALMM suspension on the Solar Sector: MNRE

In an exclusive interview with Mercom India, Lalit Bohra, Joint Secretary at MNRE, helped understand the idea behind the ALMM suspension and its expected impacts.

He said, “We have not exactly lifted the policy; we have said that the ALMM will be in abeyance for a year, and all the projects wanting to use modules from non-ALMM manufacturers will have to be commissioned by March 31, 2024. For the Indian module manufacturing industry, the government has already rolled out programs like the DCR (domestic content requirement) for projects installed under the PM KUSUM (Pradhan Mantri Kisan Urja Suraksha evam Utthaan Mahabhiyan) or rooftop or the CPSU (Central Public Sector Undertaking) programs. Additionally, the local content requirement in the various government procurements also exists. So, there is a market for everyone here, which would ensure scaling manufacturing capacity in the country.”

He emphasized that developers should remember that their projects are commissioned before that cut-off period. “That’s what our circular says so that precisely means that the project must be commissioned by that date to avail ALMM suspension.”