Renewable energy sector to attract more private equity investments
Friday, November 19, 2021 2:22 PM

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Vidya Bala

BL Research Bureau

India has the macro drivers and a clear edge to be a key clean energy market for private equity investors, states the India Infrastructure report 2010 by 3i Network - IDFC.

Private equity investment in renewable energy sector picked up pace in the country from 2004, with Citigroup (NYSE:C) Venture Capital's $22.5 million investment in Suzlon Energy being a noteworthy deal.

According to the report, from a private equity investment of $851 million in 2005, inflows into the renewable sector in India soared to $2,136 million in 2008.

The global meltdown in 2009 though, resulted in a sharp decline in fresh investments.

Globally, investment in clean energy has been growing at a compounded annual rate of 36 per cent reaching about $19 billion in 2009.

Separately, a study by the Word Resources Institute recently estimated a renewable energy market of over $2 billion a year in India.

The report by 3i Network too, outlines reasons for the large potential for clean energy investment in India.

Private equity investors prefer to invest in models that are fundamentally cost competitive rather than those purely driven by incentives, given the lower business risks in the former.

According to the report, India is uniquely placed on this count due to the following reasons: one, it has a large domestic market that can provide economies of scale and reduce cost by being a testing ground for technologies that are about to be commercialised. Indian market is viewed to be large, given the abundance of renewable resources, with only 14 per cent tapped so far, according to the Ministry of New and Renewable Energy.

Two, technical competence and cost advantage (lower deployment cost) could make India a hub to supply to other global markets. The report observes that wind farm costs in India, for instance, are almost half of that in Europe and the US. Except solar energy, the levelised cost of energy for all renewable technologies in India is comparable with conventional power costs.

IPPs attract investment

Independent Power Producers (IPPs) in this sector appears to provide attractive investment opportunity for private equity funds as a result of policy and regulatory developments such as generation-based tariffs, renewable energy tariffs and the national solar mission.

Companies such as Auro Mira Energy, Greenko, Orient Green Power and Green Infra have been cited in the report as some of the IPPs which received funding from investors such as IDFC PE, Axis PE, Baring PE and Global Environment Fund.

Private equity players such as IDFC have also come up with new models in 2009 by setting up IPPs themselves; Green Infra, a company that develops and operates power generation projects across wind, solar, hydro and bio-mass segments being a case in point.

The India Infrastructure report focuses on infrastructure development in a low carbon economy and covers legal, regulatory, institutional and financial issues needed to facilitate low carbon technologies.

The report has reposed faith in India's ability to adopt clean technology as it is still at an early stage of infrastructure development, which provides an opportunity to achieve a low carbon growth path going forward.

Clean energy has received renewed focus in recent times with India and the US agreeing to set up a research and development centre for clean energy in India with an annual funding of $5 million a year for five years, with similar investment from private players as well.

(Source: )
(Source: Quotemedia)


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