Renewable projects in India could fall behind
Research from Climate Policy Initiative (CPI) and the Centre for Emerging Markets Solutions (CEMS) at the Indian School of Business (ISB) has revealed that high interest rates and relatively short-term loans for renewable energy projects in India add 24 to 32 percent compared to similar projects in the U.S. and Europe.
India's government has set a goal of 4,000 to 10,000 MW of renewables by 2017 and 20,000 MW by 2022. These financing issues will make it difficult for India to meet these goals.
Even if the cost of debt goes down, issues with loan terms, access to low-cost equity, limits on foreign debt, and national banking practices are likely to present additional challenges, according to the research.
CPI is analyzing how other nations have addressed this issue. For example, Brazil's national development bank has provided low-cost debt to move projects forward, and may provide helpful lessons for India.
"India has more than enough wind and solar potential to meet the country's ambitious targets," said Reuben Abraham, executive director, CEMS, ISB. "But without policy solutions, India's financing challenges will force this sector to fall behind."
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