According to an independent study released by the CEEW Centre for Energy Finance (CEEW-CEF), in the first half of 2021, Indian renewable energy (RE) developers have issued green bonds worth INR 26,300 crore ($3.6 billion), surpassing the previous one-year records. Greenko and ReNew Power account for around 70% of all issuances by value.
The findings highlight the potential of green bond markets to support India’s ambitious push to achieve energy independence by 2047, a target recently announced by Prime Minister Narendra Modi.
Since 2014, Indian developers have raised more than INR 78,200 crore ($11 billion) through green bonds in global markets for over 10 GW’s worth of Indian RE projects. Wind and solar power account for 42% of each of this refinanced portfolio and represent a combined 8.4 GW. This implies that 8.4% of India’s non-hydro RE capacity, totalling 100 GW, has been debt-financed with overseas capital.
Gagan Sidhu, Director, CEEW-CEF, and co-author of the study, said, “India’s non-hydro RE portfolio recently crossed the 100 GW mark, but we need to significantly ramp up capital mobilisation to get to 450 GW by 2030. Additional routes of capital such as green bonds will be essential for this transition, which requires investments of more than INR 15 lakh crore in power generation capacity alone. For perspective, the outstanding exposure of Indian institutional lenders to the entire power sector stood at approximately INR 13 lakh crore as of March 2020.”
The CEEW-CEF study highlighted that green bonds issued by Indian developers have generated high market interest, with average oversubscription at 360%. Asian investors have shown the greatest appetite by picking up nearly 50% of the bonds. However, the market remains nascent. Only 8 Indian developers have accessed international bond markets as of June 2021.
Shreyas Garg, Consultant, CEEW-CEF, and lead author of the study, said, “So far, international green bonds have been primarily raised by India’s established utility-scale developers. Going forward, we hope to see more developers leveraging their strong financial credentials to unlock much-needed capital through this route. Smaller players without gigawatt-scale capacities should also seriously evaluate green bonds.”
“Further, it is interesting to note that projects with state utilities make up over 60% of bond portfolios, with developers mitigating payment delay risks by diversifying their portfolios. Other firms planning bond raises should similarly structure projects into portfolios that can diversify risk and attract investor interest,” he added.
The CEEW-CEF study recommends increased participation by developers of all sizes in international bond markets. Also, industrial units looking to set up RE plants for captive consumption can leverage their strong credit profiles to obtain favourable pricing. RE manufacturers can also leverage their inherently ‘green’ businesses to raise green bonds and diversify capital.