India will need to invest $223 billion to meet its 2030 climate goals: Study

India will need a $223 billion investment to meet its wind and solar capacity goals for 2030, according to a new report released by research company BloombergNEF (BNEF) on Wednesday.

PM Modi announced five decarbonisation goals for India at the Glasgow climate summit on November 1 last year, which he called the “panchamrit” (nectar distilled from five ingredients; in this case, the five promises). These include: India’s non-fossil energy capacity will reach 500gigawatts (GW) by 2030, meeting 50% of the country’s energy requirements by then.

PM Modi also committed that India will reduce its total projected carbon emissions by one billion tonnes by 2030, reduce the carbon intensity of its economy by 45% by 2030, over 2005 levels, and achieve net-zero emissions by 2070. But he underlined that such ambitious action will be impossible without adequate climate finance from developed nations and asked rich countries to make $ 1 trillion billion available as climate finance “as soon as possible.”

The BloombergNEF report titled “Financing India’s 2030 Renewables Ambition” said corporate commitments from Indian power companies could help India achieve 86% of its 2030 goals of building 500GW of cumulative renewable energy generation capacity.

India has already installed 165GW of renewable energy by 2021. Central Electricity Authority (CEA) has forecast that India’s reliance on coal will drop from 53% of installed capacity in 2021 to 33% in 2030, whereas solar and wind together will make up 51% by then, up from 23% in 2021.

“To date the growth of renewable energy in India has been funded by a diverse set of financiers. Debt and equity structures have evolved as the market grew and new risks emerged. India’s ambitious renewable energy targets now require further scaling up of financing with new instruments and learnings from other global markets,” said Shantanu Jaiswal, lead author and head of BloombergNEF’s India research said in the report published in association with the Power Foundation of India.

Scaling up of renewables in India faces regulatory, project and financing risks, with Power Purchase Agreement renegotiation, land acquisition and payment delays were cited as key risks by industry stakeholders to BloombergNEF. Rising interest rates and inflation, coupled with the depreciation of the rupee against the US dollar are creating new challenges for the sector, the report said.

It added that regulatory tweaks to banking laws, dedicated funds for clean energy and liberalized rules for external commercial borrowing could help address some of these challenges.

India has already invested around $ 75 billion in renewable energy in the past eight years between 2014 to 2021 to install 165 GW of renewable energy which now needs to treble to $ 223 billion to meet India’s 500 GW goal by 2030, the report said.

The report said India, one of the largest renewable energy markets in the world, was the most attractive investment destination for renewables among emerging markets. “The country now needs to scale up its financing activities by tapping into alternative sources of financing and by learning from international experiences to raise $223 billion in the next eight years,” it said.

India’s electricity consumption has surpassed the 2019 level after a 3% drop in annual power demand in 2020 due to the Covid-19 pandemic. The country’s power consumption in 2021 was 48% higher than in 2011. India’s power generation capacity grew by 118% between 2011 and 2021.

The share of renewables’ share in the capacity reached 37% in 2021 from 31% in 2012. Solar power has expanded the fastest at 60GW in 2021 from less than 1GW in 2011.

Annual coal capacity additions have fallen sharply from 19GW in 2015, to just 4GW in 2021. At the same time, annual renewable capacity additions have grown. Since 2017, annual additions of renewable capacity have outpaced those from coal power. The levelized cost of solar photovoltaics in 2021 was among the cheapest in India globally.

“According to the CEA model, India would need 280GW of solar and 140GW of wind by 2030. Two-thirds of the installed capacity would be zero-carbon sources, while 267GW of coal and 25GW of gas plants would remain in the mix. Based on this our calculations suggest India will need at least $ 223 billion investment by 2029. This means India immediately needs to raise money from diversified sources globally and within India,” said Rohit Gadre, an analyst in BNEF’s India research team.