The “Financing the Renewable Energy Sector” session at the Mercom India Renewables Summit 2024 brought together key industry leaders to discuss the current landscape, challenges, and opportunities in financing renewable energy projects in India.

The panel featured Pranab Kumar Sinha, Executive Director of Power Finance Corporation; Manjiri Bhalerao, Chief General Manager of Exim Bank; Hitesh Paliwal, Senior Vice-President and Zonal Head, North Zone, State Bank of India; and Vikram Sheth, Head, Investment Banking at New Age.

The discussion was moderated by Priya Sanjay, Managing Director, Mercom India.

Pranab Kumar Sinha highlighted the significant funding the Power Finance Corporation (PFC) has provided to the renewable energy sector. In the past year, PFC funded around ₹600 billion (~$7.1 billion), up from ₹480 billion (~$5.7 billion) the previous year.

This funding has supported various projects, including wind energy and solar panel manufacturing, with notable investments in companies like Adani.

Sinha said PFC offers subsidized interest rates for renewable projects and is exploring funding opportunities in emerging areas such as pumped storage, battery storage, and green hydrogen.

However, he noted the challenges in green hydrogen projects, particularly concerning certification and cost optimization.

Manjiri Bhalerao discussed Exim Bank’s pioneering role in green bonds since 2015 and its commitment to sustainability. The bank operates two books under its sustainability framework: a commercial book and a book extending lines of credit to overseas governments.

Exim Bank aims to allocate 10% of its commercial book to the renewable energy sector by 2027.

Bhalerao also talked about the bank’s sustainability finance program, which covers a broad range of renewable energy projects, including small hydro and wind.

Exim Bank offers discounted rates, and has unique eligibility criteria that allow financing for companies involved in import/export activities or those providing significant power output.

Hitesh Paliwal provided insights into the State Bank of India’s (SBI) approach to renewable energy financing. He noted a muted growth in the solar sector last year, with installed capacity dropping from 13 GW to 8 GW.

Despite this, he was optimistic about the sector’s future, emphasizing the shift towards “innovative solar” funding focusing on climate adaptation rather than just mitigation.

Paliwal highlighted the advancements in solar technology, such as the transition from mono to TOPCon modules with N-type cells and the decreasing costs of solar manufacturing due to falling commodity prices. He said SBI has the capital to meet the sector’s needs and is supported by favorable state policies.

Vikram Sheth discussed the role of New Age in facilitating investments in India’s renewable energy sector. He pointed out that while large global funds are interested in entering the Indian market, the local ground realities can be challenging. New Age creates partnerships between international investors and local entities, including EPC players and corporate houses, to form joint ventures to address these challenges.

Sheth emphasized the importance of strategic investments, particularly for companies looking to fulfill their ESG agendas.

He cited Mercom’s analysis, based on which he estimates that India needs to add 50 GW of renewable capacity annually over the next 5-6 years, requiring around ₹900 billion (~$10.7 billion) to ₹1 trillion (~$11.9 billion) in equity per year.

Sheth stressed that liquidity is available as long as there is a viable growth story.

Key Takeaways

• Substantial Funding and Growth Potential: PFC and other financial institutions are significantly investing in the renewable energy sector, with projections of substantial market growth.
• Innovative Financing Models: Institutions like Exim Bank and SBI are adopting innovative financing models and offering incentives to support the sector’s growth.
• Technological Advancements: Advances in solar technology and decreasing manufacturing costs make renewable projects more viable.
• Strategic Partnerships: Forming joint ventures with local partners can be crucial for international investors looking to enter the Indian market.
• Challenges and Opportunities: While there are challenges, the overall outlook for the renewable energy sector in India remains positive.

The session underscored the importance of diverse financing options and strategic partnerships in driving the growth of India’s renewable energy sector.