1. Challenges in Financing Renewable Energy
B V Rao
Director (Technical)
Indian Renewable Energy Development Agency Limited ( IREDA)
16th March, 2016 | New Delhi

2. Power Scenario in India
Installed capacity of 288 GW, of which RE capacity is over 39 GW (as on Feb 2016)

3. 175 GW RE Target by 2022 287 GW Private Sector
Commitment of 268 GW from 414 Companies
PSUs
Commitment of 19 GW from 48 PSUs
Manufacturing
Commitment of 62 GW from 17 Manufacturing Companies
Finance
Commitment for financing 78 GW from 40 Banks

4. Growth in Renewable Investment in India–
Investment in India’s renewable industry increased more than 22% in 2015 to reach $10.9bn
Rise largely attributed to scale, where investment reached $5.6bn, up 80% from $3.1bn last year

5. Investment Requirement–
175 GW RE plan entails investment of Approx. $ 140 billion (Rs. 8,50,000 Crore)
Debt (70%)
$ 98 Billion (Rs. 6,00,000 Crore)
Equity (30%)
$ 42 Billion (Rs. 2,50,000 Crore)
Multilateral and Bilateral
NBFCs
Commercial banks
Bonds

6. Sources of Low Cost Capital
Instruments
Indicative Rates
Sources
Green Bonds
7-9%
Public Deposits
International Funds
6-8%
Multilateral Agencies
Insurance / Pension Funds
Corporate
Raising Equity
10-12%
Stock Exchange, Mutual Funds
Climate/ Carbon Funds
0-3%
Tax on Fossil Fuels

7. GOI Initiatives to promote Renewable Energy Financing
Innovative
Financing
Mechanisms
Faster RE deployment
Increased availability of finance
Lower rates of interest
Renewables accorded Priority Sector lending status: Loans up to ₹ 15 crore for renewable power projects included. Banks mandated to disburse 40% of adjusted net bank credit to priority segments.
Rooftop Solar through Home Loans: DFS has issued guidelines and circulars issued by various banks to include rooftop under housing loan
Tax-Free Bonds: Government approves INR 50 billion tax-free bonds to enable low interest rate funding for RE
Green Bonds: Enabling low cost funding for clean energy , REC, PFC, IREDA, IDBI and private sector like ICICI, Yes Bank asked to issue green bonds to raise funding for RE projects.
Increase in Clean Environment Cess from Rs.200/tonne to Rs.400/tonne to boost renewable energy.
Indian Renewable Energy Fund ( 1 Billion US$) : To raise funds to invest in Renewable Energy Projects and associated value chain including equity (Proposed)

8. Proposed Dedicated Renewable Energy Fund For India–
Govt. of India (through IREDA) proposes to set up USD 1 to 1.5 bn fund for renewable energy
Fund is to be setup in line with National Infrastructure Investment Fund (NIIF) structure
Govt. owned entities such as PFC, REC, NTPC and IREDA have in principle agreed to invest USD 315 million into the fund as Anchor Investors
Fund will be managed by a reputed international fund manager whose selection is being undertaken through an ICB process
Received prima facie interest from various large fund managers to act as Investment Managers (GP) for proposed fund.
Structure of the fund
To be setup as a ‘Category I’ Alternative Investment Fund (AIF) under SEBI (Alternative Investment Funds) Regulations, 2012.
Independent trustee company will be trustee.
Anchor Investors and Other Investors would be LPs in the fund and would have role on Limited Partner Advisory Committee (LPAC).
LPAC would not be decision making body and all investment decisions would be made by Investment Manager.

9. Tax Free Bonds for Renewable Energy–
Tax free bonds of INR 5,000 crores have been allocated to four institutions
S. No.
Name of the Institution
Amount allocated
(INR Crores) 1
IREDA
2000 2
NTPC
1000 3
REC 4
PFC
IREDA’s Tax free Bond Public Issue of Rs.1716 Crore was oversubscribed by 3 times on the day of opening.
The average cost of Tax free Bond of Rs.2000 Crore is 7.50% .
IREDA’s Tax free Bonds were rated as AA+ by ICRA and India Rating Research Pvt Ltd. On stand alone basis.
Entire Tax free Bond proceeds will be utilized for on lending to RE & EEC Projects.
IREDA Tax Free Bonds:

10. Key Challenges in Financing RE projects
Policy Regime
Long Term & consistent policies
Visibility of tariff policy
Regulatory interventions against the existing tariffs
Compliances of RPOs and RECs
Timely approvals
Infrastructure
Grid connectivity and evacuation facilities
Must run status for RE projects
Timely payments by DISCOMs
Forecasting and re-scheduling

11. Key Challenges in Financing RE projects
Long terms low cost funds
Pensions funds
Sovereign fun ds
Insurance funds
Improve “east of doing business” and transparency
“Single Window Clearance” systems
Land acquisition for RE projects
Technology aspects
Experience of developers for RE projects
Emerging market – lack of organized financial sector

12. Indian Renewable Energy Development Agency Limited bvrao@ireda.gov.in
Thank You
Indian Renewable Energy Development Agency Limited