2021 Clean Energy Investment Trends – Analysis

India’s large-scale renewable energy sector has been characterized by mixed fortunes in 2020 and the first half (H1) of 2021. Interest in investing has remained robust even amid the COVID-19 disruption with solar capacity PV and solar-wind hybrid allocated up 35% year-on-year to 21 GW in 2020. However, allocated capacity fell to 2.6 GW in the first half of 2021 as a backlog of sales agreements unsigned electricity (PSA) delayed the call for tenders for new capacities. At the same time, allocations of new wind power capacities stopped in 2020 and remained sluggish in H1 2021 in a context of lackluster calls for tenders. The renewable energy sector has witnessed considerable innovation in tender design, largely focused on facilitating the integration of variable renewable energy. The sector has also seen increased participation from Central Public Sector Undertakings (CPSUs) as well as new International Independent Power Producers (IPPs) which have driven solar tariffs to a record high of INR 1.99/kWh even in a context of considerable volatility in commodity prices.

These developments have heightened scrutiny of the returns associated with India’s renewable energy sector. To shed light on these questions, the Clean Energy Investment Trends 2021 report analyzes the project-level equity return expectations associated with plain vanilla assets over the period July 2020 – June 2021 as well as those corresponding to certain hybrid projects. It attempts to contextualize these return expectations by comparing them to those of other geographies and examines their sensitivities to the prices of solar photovoltaic (PV) modules, which are now subject to increased volatility. The report also examines land-related challenges hampering the large-scale renewable energy sector and offers updates on debt financing and other key market trends.