India’s renewable energy sector given major funding boost

Power Finance Corp. has announced that it plans to more than double its loan sanctions for renewable energy development in the next 12 months, after admitting the increasing risk of investing in more conventional energy projects.

India’s largest state-run lender will increase the approval of its loans in clean energy from 6.75 billion rupees to 15 billion rupees ($305 million) in the next financial year, with the majority of funding expected to be granted to solar and wind plants.

The Indian government established institutions such as Power Finance Corp. and the Rural Electrification Corp. Ltd as dedicated funders to the country’s power projects. However, despite increasing funding in renewables by four percent in its fiscal budget, loans dedicated to clean energy still fall some way short of funds made available to more conventional power projects, which will see 435 billion rupees of investment this year.

There was though further evidence of the Indian government looking to reduce the country’s reliance on energy from fossil fuels in July last year with the creation of Power Finance Green Energy Ltd., a subsidiary of Power Finance. To date, the exclusive green energy arm of Power Finance has approved nearly 30 billion rupees to renewable projects, with an additional 13.4 billion rupees in loans outstanding as of December 30th 2011. At the start of the new financial year Power Finance Green Energy will handle all of the loans dedicated for renewable projects.

Additionally, clean energy is also set to gain from the $300 billion of investment pledged by the Indian Prime Minister, Manmohan Singh, to upgrade and expand India’s electricity network. The initiative, set up to help drive economic growth by nine percent 2017, is expected to provide an increasing share of funds towards clean energy rather than to more conventional power projects, which are deemed risky considering the rising costs of coal imports. Coal imported from Australia and Indonesia has risen by a staggering 28 percent in just two years, according to Bloomberg.

“Given that fossil fuel costs have gone up, investments in wind and solar are surging,” says Power Finance Chairman, Satnam Singh. “We’re not afraid to go at renewable in a big way where lending happens much faster, within six months.”

 

Images: Climate Action Stock Photos