Clean energy must play a central role in achieving India’s green growth goals. The IFC estimates India will need $450 billion to finance its 2030 clean energy targets.
While India’s clean energy sector continues to grow and attract significant investment, there can be serious challenges to the growth trajectory, if the capital deployed in existing projects is not recycled and if new sources of capital are not included to meet the increased future investment requirements. It is, therefore, imperative that operational renewable energy projects access capital markets to recycle capital and attract new investor classes.
This study looks at various avenues for renewable energy to access capital markets and shows that shifting project debt to capital markets can be primarily achieved via two pathways:
- Financial institutions such as banks and NBFCs shift diversified loan portfolios to capital markets by converting pools of regular cash flows into investable financial securities, via a process known as securitization
- Alternatively, developers directly go to capital markets, and use the proceeds to retire existing loans.
These paths are common in economies with more developed capital markets, however, in India, barring a few sporadic transactions, both pathways are yet to take off in any substantive manner. Therefore, the study suggests specific solutions that would help to address some of the main barriers in the medium and longer term.
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