India- Favourable Investment Destination for Renewable Energy

India is rapidly emerging as a global leader in renewable energy. Abundant solar, wind, and hydro power potential coupled with robust regulatory and policy framework offers a favourable business environment for renewable energy projects in India. At 176.5 GW of installed renewable capacity (as of June 2023), India has the fourth largest installed capacity globally. A large and growing population and a target of achieving 450 GW of renewable energy capacity by 2030 (includes 280 GW of solar power, 140 GW of wind power, and 10 GW of bioenergy) offer ample opportunities for investments and expansion in India.  

Policy and incentive thrust  

The Indian government has fostered a competitive renewable energy ecosystem based on the ‘Aatma Nirbhar’ philosophy - strong incentives for capacity addition and conducive policies for research led innovation. One of the key policies, the National Solar Mission, launched in 2010, has proved to be a major driving factor for the rapid scale up of solar energy in India in the last 15 years. Recent initiatives such as permitting Foreign Direct Investment (FDI) up to 100% under the automatic route, the policy to set up Ultra Mega Renewable Energy Parks, and Standard Bidding Guidelines for tariff based competitive bidding for grid connected projects etc. continue to be a driving force for the sector.  

Active support has been provided through productivity linked incentives worth $ 3.2 Bn for solar PV manufacturing and diversification of the PV supply chain. The Green Energy Open Access Rules 2022 and the Green Energy Corridor scheme have helped democratize round-the-clock energy access to small industrial and commercial consumers and promote renewable hybrid projects. Sale of Renewable Energy Power through exchanges has been facilitated through the launch of Green Term Ahead Market (GTAM). Numerous other initiatives such as the PM KUSUM scheme, and financial incentives for off-grid solar (Solar Rooftop scheme), bioenergy and small hydro power function as ecosystem enablers in India. 

The recently introduced the ‘Green Hydrogen Mission’ worth ~ $ 2.4 Bn aims to achieve at least 5 MMT (million metric tonnes) of green hydrogen production capacity per annum, and 60 GW of electrolyser capacity by 2030 – and to make India a market leader in adoption of green hydrogen. Financial incentives through Strategic Interventions for Green Hydrogen Transition Programme (SIGHT) worth $ 2.12 Bn are also being offered for both, green hydrogen production and electrolyser manufacturing. 

Leading to Sustainable development 

India has committed to reduce emissions intensity of India’s gross domestic product (GDP) below 45% by 2030. Strong commitments have led to an ever-expanding renewable energy sector, which, not only addresses the energy security and environmental concerns but also facilitates a more sustainable and equitable future for its citizens. The decentralized nature of renewable energy systems allows for improved energy access in remote and off-grid regions, contributing to enhanced social equity and inclusivity, while the rapid development and deployment of technologies have spurred technological innovation, and fostered capacity building in India. 

Strong government support  

Favourable incentives, affordable financing options, solar parks, and   dedicated investor facilitation channels make India as one of the most attractive destinations for setting up renewable energy plants. India is actively forecasting and scheduling renewable power, promoting reliable storage solutions, and banking facilities to ensure adequate grid connectivity and round the clock power supply.  

The clarity and consistency in government policies has tremendously helped de-risk renewable energy projects in India. Today, India offers one of the lowest tariffs worldwide, ranging $ 0.031-0.037/kWh. A collaborative approach between the government and private sector has successfully de-bottlenecked major challenges in execution paying way for ease of doing business in India. 

Invest in Indian Renewables - Avenues for foreign companies 

Foreign companies looking to invest in India's thriving renewable energy sector have a plethora of opportunities and avenues to explore. The first avenue for foreign investment is through direct project development. By identifying viable renewable energy projects, foreign companies can invest in their development, construction, and operation. This approach allows for greater control and higher potential returns. Participating in competitive bidding processes for government tenders and auctions is another strategic route to secure projects - the government's favourable policies and incentives, such as tax benefits and long-term power purchase agreements, further enhance the investment potential. Furthermore, foreign companies can form partnerships or joint ventures with local Indian companies, leveraging their expertise and local market knowledge. This not only helps in navigating the regulatory landscape but also fosters technology transfer and skill development.  

Another avenue for foreign investment is through acquiring existing renewable energy projects or companies in India. This allows for immediate entry into the market and takes advantage of the existing infrastructure and operational efficiencies. Foreign investors can also explore financing options and collaborations with Indian financial institutions, who have been actively supporting the growth of the renewable energy sector. Lastly, fostering strong relationships with government agencies and industry associations can facilitate networking, knowledge sharing, and access to the latest market trends and opportunities.  

With India's ambitious renewable energy targets and favourable investment climate, foreign companies have an excellent opportunity to contribute to India's energy transition while also enjoying significant returns on investments. 

Lucrative opportunity and attractive returns  

India is an ideal location for renewable energy investments. More than $ 78 Bn have been invested in the Indian renewable energy sector since 2014. Abundant labour, easy access to affordable capital, and single window clearances, make India an attractive destination to set up renewable energy plants. The returns on investment in Inda are defined through long-term power purchase agreements at guaranteed rates, and robust grid connection. Today, renewable energy projects worth $ 197 Bn of investments are underway in India. Furthermore, several Indian states have announced their own individual renewable energy targets, which will further solidify the potential for attractive returns. 

Growth outlook  

Future growth prospects of renewable energy in India are incredibly promising. Sectors such as solar energy have seen tremendous growth in the last decade compounding an annual growth rate of ~35%. Solar and wind energy together dominated 99% of overall capacity addition for the year 2022.  

With India expected to grow more than 7% in the coming years – a booming economy, and rising energy demand pave the way for rapid scale up of renewable energy. Combined with massive clean energy transition targets, India is set to drive renewable energy story globally.