Solving India's Renewable Energy Financing Challenge: Which Federal Policies Can Be Most Effective?

This report by the Climate Policy Initiative evaluates federal policies to support India's goal of doubling renewable energy capacity to 55,000 MW by 2017. It compares existing subsidies—such as generation based incentives and viability gap funding—against proposed debt-related policies, concluding that low-cost, long-term debt is the most cost-effective long-term strategy, though it faces shortS short-term budgetary constraints due to high initial capital outlay.

• The Government of India aims to double its renewable energy capacity to 55,000 MW by 2017, but unsubsidized renewable energy remains 52-129% more expensive than conventional power.
• Debt-related federal policies providing low-cost, long-term debt are more cost-effective in the long term than existing federal policies. Specifically, a combination of reduced cost and extended-tenor debt is the most cost-effective option. For wind energy, a 5.9% loan with a 10-year tenor extension could reduce total subsidies by 78% compared to the most cost-effective generation based incentive (INR 2.03/kWh). For solar energy, a 1.2% loan with the same tenor extension could reduce total subsidies by 28% compared to viability gap funding at 56%.
• While debt-related policies are cost-effective long-term, they may be impractical in the short-term due to high capital outlay. Compared to reduced-cost, extended-tenor debt, the current generation based incentive can support 83% more wind deployment in one year, and current viability gap funding can support 60% more solar deployment in one year.
• Certain short-term policy alternatives are more attractive than current support levels. For wind energy (with state support of INR 4.9/kWh), an interest subsidy of 3.4% would reduce total subsidies by 11% and increase one-year deployment by 83%, while accelerated depreciation of 38% would reduce subsidies by 17% and increase deployment by 87%. For solar energy (with state support of INR 5.6/kWh), an interest subsidy of 10.2% would reduce total subsidies by 11% and increase one-year deployment by 30% compared to 30% viability gap funding.

APA

Climate Policy Initiative (2014). Solving India's Renewable Energy Financing Challenge: Which Federal Policies Can Be Most Effective? https://www.climatepolicyinitiative.org/publication/solving-indias-renewable-energy-financing-challenge-which-federal-policies-can-be-most-effective/

Chicago

Climate Policy Initiative. Solving India's Renewable Energy Financing Challenge: Which Federal Policies Can Be Most Effective? 2014. https://www.climatepolicyinitiative.org/publication/solving-indias-renewable-energy-financing-challenge-which-federal-policies-can-be-most-effective/.

Wikipedia

{{cite report |author=Climate Policy Initiative |title=Solving India's Renewable Energy Financing Challenge: Which Federal Policies Can Be Most Effective? |date=23 March 2014 |url=https://www.climatepolicyinitiative.org/publication/solving-indias-renewable-energy-financing-challenge-which-federal-policies-can-be-most-effective/ |access-date=17 August 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{climatepolicyinitiative2014solving, author = {{Climate Policy Initiative}}, title = {{Solving India's Renewable Energy Financing Challenge: Which Federal Policies Can Be Most Effective?}}, institution = {Climate Policy Initiative}, year = {2014}, month = mar, url = {https://www.climatepolicyinitiative.org/publication/solving-indias-renewable-energy-financing-challenge-which-federal-policies-can-be-most-effective/}, urldate = {2026-08-17}, note = {Indexed by Climate Insights Directory} }