Skip to main navigation

Renewable energy country attractiveness indices: Country focus - India - EY - Global

Country focus: India

REC market experiences surge in activity through Q3

Indian flag

All renewables index44
Wind index55
Solar index22

Source: EY analysis


Email Sanjay Chakrabarti
+91 22 4035 6650

Email Sudipta Das
+91 33 6615 3400

  • Share

Activity in India’s REC market surged through Q3, and by late October, RECs were selling for double the Government’s floor price.

The increased activity is probably a sign of market concern over future energy price increases, estimated at up to 18% next year. Such indications are fueling interest in power-saving technology, and will likely support India’s goal of 15% green electricity by 2020.

Access to finance

According to BNEF, investment in Indian clean-energy projects reached a record US$7.2b (€5.3b) in the first three quarters, exceeding 2010’s total of US$5.7b (€4.2b). Solar has been key to this, generating a fourfold investment increase to US$2.4b (€1.8b) in the first nine months of the year as a result of federal and state-level policies.

In Q3 KfW Entwicklungsbank, Germany’s state development bank, agreed to provide a €250m loan to fund one of the world’s largest solar PV plants, a 125MW (expandable to 150MW) facility in Maharashtra state. Total project financing is €370m, with the remaining amount to be state funded.

The US Export-Import Bank also said it expects India to become its biggest funding recipient for clean energy projects next year, including US$575m (€423m) for solar, with around US$75m (€55m) already approved. It has approved US$1.4b (€1.0b) in new deals this financial year, raising its lending to India to US$5.5b (€4.0b).

Solar power

Solar developers were invited to register for the second National Solar Mission auction in August, which will award licenses to build as much as 350MW of PV plants by 2013. The Government increased the maximum project size from 5MW to 20MW, and will allow successful bidders to win as much as 50MW total capacity.

Projects will be allowed seven months to achieve financial close compared with the previous six. It is hoped these changes will attract larger companies previously put off by insufficient profitability from smaller projects.

Various states have also been promoting solar. In September, Rajasthan state issued draft bidding documents to develop 250MW ofcapacity, part of Phase 1 of its solar target of 10-12GW new capacity over the next 10 years. In addition, the state of Tamil Nadu plans to create 10 300MW solar parks at a cost of around INR450b (€7b).

Wind power

The Ministry of New and Renewable Energy has removed a 2002 rule which only allows wind installations at sites with a minimum wind power density of 200W/m2 at a hub height of 50 meters. This is expected to boost the wind sector, but is unlikely to alter growth potential significantly because it will mainly benefit small-scale projects.

In Q3 it was also announced that the Government plans to axe an accounting rule next April that provides a federal tax break for wind farms, which it claims has encouraged investment as a way of cutting taxes rather than diversifying the energy mix.

It plans to introduce a new tax code, but the announcement will probably start a rush to build projects in the current financial year, temporarily impacting 2011 activity, even if the tax break continues.

This quarter also saw the largest private equity investment in the Indian wind sector, with Goldman Sachs acquiring a majority stake in ReNew Wind Power, an Indian renewable energy producer, for INR10b (€148m). ReNew plans to expand capacity by 200MW to 300MW annually, and will use the investment for new projects.


In order to boost biomass-based power generation, the Government is preparing a national bioenergy program for launch in the 12th Five-Year Plan (2012-17). It has allocated INR34b (€1b) for the mission and hopes it will have the same success as the National Solar Mission.

Back to the top

Back to top