Heeding to clarion calls for urgent and bold action to combat climate change, India made its bold intention clear at the United Nations Conference of Parties (COP) 26 meet in November last year. Pledging to achieve the hallowed net-zero carbon emissions status by 2070, a five-point climate action plan has been put into action with a near-term target of increasing its non-fossil fuel energy generation capacity to 500GW and meet 50% of its energy requirements from renewable energy by 2030. Understandably, this will necessitate huge investments, to the tune of an estimated $10trillion dollars till 2070, with an immediate need of about $1trillion in climate finance. While developed countries have been slow in supporting nations like India in funding green infrastructure projects, financial regulators such as the RBI and SEBI are enabling the creation ofa financial ecosystem that will channel private investments from both domestic and international institutions. This bodes well for the green infrastructure financing sector in terms of both, growth and investment opportunities, that will undoubtedly create long term value for investors and the nation alike.
To bring down the Indian economy’s carbon intensity below 45 percent by 2030, India will need to substantially augment its Solar power generation capacity and develop Green hydrogen infrastructure, a technology that has the potential to meet 19% of the industrial sector’s future power requirements in the country. In addition to concessional finance estimated at around $8billion for the current decade, India will need $1trillion in infrastructure lending to ensure it can achieve these short-term goals. The scale of investment needed becomes clear when one considers that infrastructure spending in building green energy infrastructure will account for 5% of India’s GDP till 2030. A significant part of this lending will be towards ramping up India’s existing Solar power generation capacity to 450 GW from its current level of 101GW and investing in power grid upgradation across the country.
To address this debt financing requirement, it is imperative to have a growing number of institutions mobilising public capital and catalysing private investments to invest in this sector while balancing both national policy and investor interests. Given the scale of green financing requirements, the Government of India will need to set up regional green banks and green windows at existing financial institutions, who will in turn deploy low-cost public funds and structure risk mitigation products to attract even more private capital into low carbon markets. Towards this end, the institutions PTC India Financial Services Limited (PFS) can play a very crucial role in achieving the challenging task and developing the concept of green financing for humanity. Unlike a traditional public financial institution which are focused more on delivering the desired task by facilitating requisite finance, the institutions like PFS havedemonstrated the business potential as well as profitability of financing projects involved in clean energy generation while can also play an important role in advising policymakers on steps to be taken to bolster investment in the sector with safety to public money and adequate return to investors.
While entrepreneurs and start-ups join the fray to develop the infrastructure ecosystem that will fuel our country’s energy requirements through renewable source, there is a burgeoning need for more institutional financial capacity to mobilise capital towards supporting such ventures. Many private entities involved in providing debt assistance to projects in this clean energy value chain will reap the benefits of long-term value creation as they fund the creation of green assets involved in power generation, transmission and distribution as also the green fuel distribution infrastructure. With India firmly set towards the relentless pursuit of adopting green energy, such financial institutions may just be the answer for investors looking for at a unique and environmentally conscious approach towards generating multi-fold returns in the future.
Views expressed in this article are the personal opinion of Abhinav Goyal, Head Treasury & Investor Relations, PTC India Financial Services.
