NEW DELHI: Eyeing an investment of USD 200 billion in renewable energy for a cleaner climate, India is up against a mammoth task with just about 5 gigagatts of capacity addition estimated to be taking place in 2015 — as against a target of quadrupling the existing capacity to 175 GW by 2022.
On positive side, foreign and domestic investors have already committed to put in USD 20-30 billion to set up renewable energy ventures, while green bonds seem to be catching up with proceedings exceeding Rs 10,000 crore coming in in the first year itself of these ambitious targets.
A further boost is expected in the new year 2016 with the markets regulator Sebi proposing a new regulatory framework to make it easier to issue and list green bonds, while a new concept of ‘YieldCo’ is also in the works to help garner funds exclusively for green energy ventures.
The proposed new regime may include tax incentives and would be on the lines of REITs (Real Estate Investment Trust) and InViTs (Infrastructure Investment Trust).
A ‘YieldCo’ is a publicly listed company that is formed to own assets that generate a predictable cash flow, primarily through long-term contracts. In this model, the cost of capital is lowered by separation of volatile assets like development, research and construction.
The model, which has already been gaining ground in the US and some other markets, is used in the renewable energy sector to protect the investors against regulatory changes. Under this model, the investors get the annual returns like a dividend and the capital remains invested for the long term.
Besides, there are tax incentives to make this model attractive.
With climate change becoming a major global issue, the Modi government has fixed an ambitious target to quadruple its renewable power capacity to 175 gigawatts by 2022 as part of plans to supply electricity to every household. The total capacity at the start of 2015 stood at just about 34 GW.
It is targetting 100 GW of solar capacity, 60 GW of wind power, 10 GW of biomass and 5 GW of hydro projects. Also, efforts are being made to achieve 20 per cent biofuel content in motor fuels by 2017.
The goal, entailing USD 200 billion of investment, looks challenging amid concerns that the government may end the tax breaks that have been used to spur the introduction of renewable power.(AGENCIES)
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