Renewable energy sector needs $30 billion debt and equity financing
“One lakh mw capacity of mainly thermal is lying at various stages of incompletion, if you can put it into place along with 2,50,000 mw of capacity, India could in shortest possible time of less than 18 months have at least 80 per cent of what we have today,” said Mr Prabhu while inaugurating a seminar on ‘Financing & Regulatory issues in Renewable Energy' organised by The Associated Chambers of Commerce and Industry of India (ASSOCHAM).
“If we use this opportunity now we can address the energy problem in a very significant way,” he added.
Terming financing as an extremely challenging issue being faced by the renewable energy sector, Mr Prabhu said, “We need $7.5 billion of equity and $22.5 billion of debt and to make that happen we need to put in some sort of an instrument in place.”
“Equity is going to be extremely challenging unlike debt financing,” added Mr Prabhu.
He suggested that the Government should transfer the clean energy cess worth Rs 100 per tonne being collected from Coal India to the Indian Renewable Energy Development Agency (IREDA) as they could leverage this by nine times as part of capital adequacy norms for non-banking financial companies (NBFCs).
“So if we give them something like Rs 20,000 crore they could easily have another Rs 1,80,000 crore which they can borrow from the market because 1:9 is possible for them as NBFCs could leverage the capital by nine times and this is something which they should be doing by using IREDA more effectively,” said Mr Prabhu.
“We need to access lot of international finance and this is something which is possible through climate finance because there are a large number of entities both private and public who have interest to promote renewable energy because of various reasons,” added Mr Prabhu.
He emphasised upon using innovative ideas and mechanisms to create new instruments to finance the ambitious programme of promoting renewable energy and as its spinoff benefits are huge there is a need to put it in place.
He also said that use of tax as an instrument to discourage non-renewable energy is undesirable for India as it would push the energy costs upwards.
On the issue of making states to take up the responsibility for switching to renewable energy, Mr Prabhu said that there is a need to enforce the RPO (Renewable Purchase Obligation).
“The regulatory framework in terms of law, in terms of distributions, in terms of policy is already in place and it is not difficult to make it work,” he said.
“Even large utilities like NTPC (National Thermal Power Corporation Limited) must be forced to have RPO and then automatically the mix into energy will increase,” added Mr Prabhu.
He further said that various reforms like open access that have been suggested in the Electricity Act, 2003 have not been carried out as supply is short of demand.
