Exploring the growing opportunities for the renewable energy in India
Explore the opportunities that change India’s sustainability landscape.
India is fast becoming one of the largest green energy producers in the world. While energy demand is growing in the populous nation, so are the challenges associated with climate change. In response, the government strives to exceed renewable energy targets, which has created an abundance of business opportunities in the sector. This article explores these growth opportunities and examines the deals seeking to change India’s sustainability landscape.
A resilient economy sparks hope
Despite the pandemic, India's long-term economic outlook remains positive due to its large domestic economy, young population, healthy savings and investment rates, and increasing integration into the global economy.
However, India faces several environmental challenges. According to the Global Climate Risk Index 2021, India is among the top 10 countries most affected by climate change1. It is home to many ecologies - glaciers, mountains, long coastlines, semi-arid regions - all climate change hotspots.
High energy consumption industries such as construction, manufacturing and the services sector continue to drive economic growth and consequently energy needs. It is estimated that India has an electricity-GDP elasticity ratio of 0.8. Thus, around 7 per cent growth in energy supply is required if India is to grow at 8 per cent2.
Urgent political action needed
Aware of the need for urgent action on the environmental front, political leaders are pushing for greater investment in infrastructure. Addressing the Climate Ambition Summit in December 2020, Prime Minister Narendra Modi made India's direction on renewable targets clear: "India is not only on track to achieve its Paris Agreement targets, but to exceed them beyond expectations3”.
India's Power Minister, R. K. Singh, has set an aggressive goal of 60 per cent renewable energy generation by 2030, extending the 175 GW target by 20224: this is one of the world's most ambitious expansion plans for renewable energy.
According to EY's Renewable Energy Country Attractiveness Index 2020, India is the fourth most attractive renewable energy market globally due to the sector’s cost-competitiveness.
DBS offers expertise in the Indian renewables sector
While India’s renewables market is rich with opportunities, capitalising on these requires in-depth knowledge of the market and experience working with key players in the industry. Recently, DBS has orchestrated three financing deals in India that deserve a mention here.
- EDEN Renewables
EDEN Renewables recently secured funding of up to USD 165 million for a 300 MW utility-scale solar plant. DBS collaborated with two leading European sponsors, Total Eren and EDF Renouvelables - companies with significant renewable energy pipelines in Asia. The deal reinforces the bank’s strategy to support strong developers at the forefront of the energy transition story.
As one of three banks involved in this deal, DBS acted as the Environment and Insurance Coordinator. Given the size of the new solar plant compared to their existing facilities, it is a crucial investment for EDEN.
- Vena Energy
Vena Energy secured funding to invest in a ~100 MW AC wind farm in Gujarat, India, in November 2020. In addition to being a Mandated Lead Arranger, DBS acted as Account Bank and Hedge Counterparty on the deal.
DBS’s familiarity with wind farm technology, suppliers, construction-related challenges, and on-the-ground nuances in India allowed the bank to structure financing to ensure appropriate risk allocation amongst the various stakeholders.
- Adani Green
In March 2021, Adani Green Energy successfully secured USD 1.3 billion to finance the construction of three hybrid (combination of solar and wind) projects in Rajasthan with a total capacity of 1,690 MW AC. The transaction is one of the largest project financing deals in the renewable sector in India.
In addition to the Mandated Lead Arranger and Bookrunner role, DBS acted as the Account Bank and one of the Hedging Counterparties on the deal.
Overcoming market challenges to unlock deal opportunities
Navigating the challenges of the Indian business landscape needs the expertise of a knowledgeable local partner. Plus, raising capital during Covid-19 is impacted by market uncertainty and low interest in long-term capital commitments from investors. DBS has pushed through these deals despite a turbulent environment.
“DBS leveraged its experience in India, sector expertise and structuring capabilities to deliver solutions to sponsors. We help clients achieve an optimal risk allocation working through land acquisition issues, complex multi-party construction contracts, project costs and contingencies,” says Subash V Narayanan, Managing Director and Head, Project Finance, Institutional Banking Group, DBS.
The future of India’s renewables economy
2020 was a notable year for India’s clean energy sector. India is ranked third in terms of its renewable energy investments in 20205.
The sector also saw landmark contracts for flexible renewable power being awarded, a key step in addressing some of the inherent limitations of solar and wind energy. Certain measures such as proactively extending project commissioning deadlines due to Covid-19 and stimulus measures for utilities have helped bolster the renewables outlook.
Given the impressive progress to date on deploying renewable energy and the government's willingness to experiment with new policy approaches, there is thus reason for optimism about India’s energy future.
Leveraging our regional connectivity, industry expertise and digital capabilities, DBS can help clients seize opportunities in complex and opportunity-rich markets such as India.
References
[2] India Brand Equity Transformation Renewable Energy Report, November 2020
