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For the third year in a row, Indian lenders directed more funding to clean energy projects than to coal-fired ones in 2020, with more projected to flow into the renewables’ industry in the following years after Prime Minister Narendra Modi outlined ambitious emissions-cutting targets last month.
According to a report by the New Delhi-based research organizations Climate Trends and Centre for Financial Accountability, clean energy projects received 74% of total contributions from financial institutions last year, which sums to Rs. 243.8 billion ($3 billion).
This is a 6% increase from 2019 approvals for renewable energy projects of approximately Rs. 229.71 billion.
The report also shows that just Rs. 85.2 billion, or 26% of the 2020 money from Indian lenders, went to coal-fired facilities, which portrays an 86% drop in coal plant approvals since 2017 and is consistent with a global decline in the availability of funding for fossil-fuel projects.
This trend is projected to continue following Modi’s announcement at COP26, increasing India’s 2030 objective for low-emission energy capacity from 450 GW to 500 GW, where 50% of the electricity is to be produced from renewable sources.
As per the government’s figures, renewable energy accounts for 40% of India’s current installed capacity of 392 GW, with coal accounting for the remaining 52%.
The report examined 42 project finance loans totalling Rs. 329.97 billion last year, solar energy received the majority of the funding, while commercial banks did not contribute to coal projects.
Only the state-run Power Finance Corporation and the Rural Electrification Corporation made funds available for combustion-fuel-based projects.
Despite funders’ preference for renewable energy, state-owned banks surfaced as lenders of last resort and funding for coal increased by 40% in 2020 to Rs. 85.2 billion, after two years of downdrift.
Moreover, the number of coal projects that have received funding has decreased, despite the fact that India has brought significant coal capacity online, with approximately 34 GW installed and another 21 GW in the pipeline.
Climate Trends and CFA wrote in the report, “As India’s energy demand growth slows and the number of renewable energy installations increases, the utilization rate of coal plants will continue to fall.” As a result, their economic situation will deteriorate further.