Renewable Energy Investment Heats Up In India

India has created a compelling investment opportunity in renewables for the private sector.
Published: Wed 06 Jan 2016

Some serious activity is taking place in India’s solar sector despite some scepticism over the 266GW of clean energy pledges made earlier in the year.

India’s RE-Invest event, held at the beginning of this year, demonstrated to the world that India’s renewables sector was open to foreign investment with 293 companies making firm commitments to invest a combined US$100 billion in 266GW of renewable energy projects in India by 2021/22. However, many questioned whether these well meaning intentions would come to pass.

Investors take India’s renewables development

A report from the Institute for Energy Economics and Financial Analysis (IEEFA), named ‘India’s Electricity-Sector Transformation: Global Capacity Building’, points out how the clean energy sector, specifically solar, has gained momentum this year. While 266GW may seem to be a distant and very ambitious goal, there have been tangible actions.

The authors of the report say that large global firms are setting up shop now and are taking the country’s renewables sector very seriously. The development in solar over the last one year is a testament to that, they point out.

Japanese telecoms provider-turned solar developer Softbank’s plan to invest US$20 billion in renewable energy in India in June was seen a “game changer” for the sector, and the announcement was followed by a flurry of investments into India by major international firms.

The most recent example is the recent partnership between The Abraaj Group, a leading investor operating in global growth markets, and the Aditya Birla Group, a US$41 billion multinational conglomerate, to build a gigawatt scale renewable energy platform focused on developing solar power plants in India, demonstrating the growing private sector role in addressing India’s clean energy demand.

Abraaj will invest in the platform through one of its Funds and the Aditya Birla Group will invest through Aditya Birla Nuvo Limited. The partnership brings together highly experienced management and operational teams.

The new solar power platform will bid for projects tendered at national and state auctions, with the intent to develop and operate utility-scale solar power plants that can provide clean and cost-effective electricity to the national grid across several key states.

Private sector responds to India’s clean energy needs

The partnership comes at an opportune time in the growth of the Indian renewable energy sector. The demand for power in India is growing as a result of the country’s expanding population, increasing urbanization and related economic activities. At the same time, the Indian government has created favourable regulatory policies to increase the use of renewable energy. This includes the setting of an explicit target to achieve 100GW of solar power capacity by 2022, with 40% of this on rooftops, compared to the current installed capacity of 4GW. [Going Solar On Rooftops: India targets 40GW by 2022]

Together, these factors create a compelling investment opportunity for the private sector, which can help meet this significant demand for renewable energy.

The new solar power platform will bid for projects tendered at national and state auctions, with the intent to develop and operate utility-scale solar power plants that can provide clean and cost-effective electricity to the national grid across several key states.

Long term and sustainable investment opportunity

Commenting on the partnership, Sev Vettivetpillai, Partner and Global Head of Abraaj’s Thematic Funds Business, said, “The gap in energy infrastructure in growth markets translates into a long-term and sustainable investment opportunity. Renewable energy is set for explosive growth thanks to technological advances, favourable policies and pricing structures that make it a competitive alternative to conventional power generation. At Abraaj, we see significant opportunity in India, one of the world’s biggest energy consumption markets. We look forward to working closely with the Aditya Birla Group to provide clean energy to Indian businesses, communities and consumers.”

Mustafa Abdel-Wadood, Partner and Global Head of Abraaj’s Regional Funds Business, added, “The renewable energy sector in India offers vast potential for growth and can play a transformative role in reducing dependency on fossil fuels and enhancing India’s long-term energy security.”

Dev Bhattacharya, Business Head, Group Corporate Strategy, Solar Power & E-Commerce, Aditya Birla Group, added, “Aditya Birla Group supports the Government of India’s initiative for a greater share of renewables in the energy mix, essential for sustained economic and industrial growth. This cooperation will contribute to reducing the carbon footprint of India as a whole.”