Green investment jumped 125% to $14.5 billion in FY22: IEEFA report

Acquisitions, bond issues make up for 75% of total value

Investment in the renewable energy sector in India surged more than 125 per cent year-on-year to touch a record $14.5 billion in the financial year 2021-22 (FY22), a report released on Thursday by the Institute for Energy Economics and Financial Analysis (IEEFA) said.

This brings into sharp focus the bets placed by companies on this segment.

Conglomerates such as Reliance Industries (RIL) and the Adani group have ambitious plans to ramp up their renewable energy capacity. Acquisitions and bond issues by a host of companies, including RIL and Adani, constituted 75 per cent of the total value of investment in FY22, IEEFA said, surpassing FY20 levels. At that time (FY20), the total investment in the sector stood at $8.4 billion, while FY21 saw a fall in investment activity  due to Covid-19, with the total deal value touching $6.4 billion.

The largest deal in FY22 was SB Energy’s exit from the Indian market with a sale of assets worth $3.5 billion to Adani Green Energy (AGEL), part of the Adani group, in October last year. Around the same time, Reliance New Energy Solar, a subsidiary of RIL, picked up REC Solar Holdings for $771 million. Among bond issues, key ones included those of companies such as Vector Green, AGEL, ReNew Power, Indian Railway Finance Corporation and Azure Power, IEEFA said.

“The increase in renewable energy investment comes on the back of the revival in electricity demand from the Covid-19 lull and commitments by corporations and financial institutions to net-zero emissions and to exit fossil fuels,” Vibhuti Garg, energy economist, and lead, India, IEEFA, said.

India added 15.5 gigawatts (Gw) of renewable energy capacity in FY22, Garg said, which brought the total installed renewable capacity (excluding large hydro projects) to 110 Gw as of March 2022.

Even with the surge in investment, renewable energy capacity would have to grow at a much faster rate to reach the target of 450-500 Gw, set out by the government, by 2030, IEEFA said.

“The Indian renewable energy sector needs about $30-40 billion annually to meet the 450-Gw target. This would require a more than doubling of the current level of investment,” Garg said.

IEEFA says for a sustainable energy transition, the government would have to roll out ‘big bang’ policies and reforms to accelerate the deployment of renewable energy.

“This means not only increasing investment in wind and solar power capacity, but also in creating an entire ecosystem around renewable energy,” Garg said.

“Investment is needed in flexible generation sources such as battery storage and pumped hydro as well as expansion of transmission and distribution networks. At the same time, modernisation and digitalisation of the grid is required with focus on the domestic manufacturing of modules, cells, wafers and electrolysers. Apart from promoting electric vehicles, there is also a need to push rooftop solar aggressively,” she said.