Over the last few years, India has significantly transformed its energy policy, with renewable energy emerging as the dominant source of capacity addition. This is triggered by two key factors. First, the government’s strong thrust on the area—it aims to build 175 gigawatt of generation capacity by 2022, and achieve 40% cumulative power capacity from non-fossil fuel-based energy resources by 2030. Figures from the ministry of new and renewable energy show that over the last 24 months, nearly 21 gigawatt of renewable energy has been added, cumulating to a total installed renewable energy capacity of around 57 gigawatt as of March 2017. Furthermore, Yes Securities’ estimates indicate there is a strong pipeline to achieve another 21 gigawatt (15 gigawatt solar, 5 gigawatt wind, 1 gigawatt others) in installed renewable energy capacity by 2019.
Second, with falling solar panel prices—our estimates show an over 50% decline in the last five years—and improving wind technology yields, renewable energy has not only become cost-competitive, but also offers low installation and feedstock risk vis-a-vis conventional power. This makes it a preferred asset class for developers and investors, which is exemplified by the recent ~Rs 2.44/kilowatt-hour bid for solar power and Rs 3.46/kilowatt-hour bid for wind power, as reported by the media in 2017. These figures are significantly lower than the tariff for new thermal and hydel capacities.
In the light of these developments, the sector—which started as a subsidy-driven, environmentally-focused alternative to conventional power—has become the mainstay of capacity additions in the country. Furthermore, renewable energy technology and policy framework are now more mature with higher-certainty data and trends on generation and equipment performance.
These fundamental changes have led to the equity, debt, and mergers & acquisitions (EDM) triumvirate, propelling growth in the renewable energy space in general and…