Reaching India’s Renewable Energy Targets: The Role of Institutional Investors

This report by the Climate Policy Initiative (CPI) analyzes the financing requirements for India to reach its target of 175 GW of renewable energy capacity by 2022. It identifies a significant gap between expected and required investment, particularly in equity, and evaluates how domestic and foreign institutional investors can bridge this gap through specific financial instruments and policy reforms.

• India set a target to achieve 175 GW of installed renewable energy capacity by 2022, comprising 100 GW of solar, 60 GW of wind, 10 GW of waste-to-energy, and 5 GW of small hydropower.
• Meeting the 2022 renewable energy targets requires $189 billion in additional investment, split into $57 billion in equity and $132 billion in debt.
• While the total investment potential is $411 billion, the expected investment is $166 billion, leaving a shortfall of $23 billion (12%) under an optimistic scenario.
• There is a severe equity financing gap; expected equity investment is $40 billion, which is 29% ($17 billion) short of the $57 billion requirement.
• Debt financing faces a realistic shortfall of 27% ($36 billion) because banks are overexposed to the infrastructure sector and burdened by stressed loans, potentially reducing their ability to provide debt to 64% of expected levels.
• Foreign institutional investors have the potential to fill 100% of the $17 billion equity financing gap, although they are hindered by binary barriers such as off-taker risk and lack of transmission evacuation infrastructure.
• Domestic institutional investors are the most cost-effective option for debt and can meet 54% of the debt financing gap ($19.42 billion), but are limited by a lack of understanding of the sector and a lack of intermediaries.
• Off-taker risk is a primary barrier for foreign investors due to the poor financial state of state-level public sector distribution companies (DISCOMs), which held over INR 3.04 trillion in debt as of 2014.
• Proposed financial solutions to reduce the cost of capital include a payment security mechanism (potential 100 basis point reduction), a foreign exchange hedging facility (potential 350 basis point reduction), and infrastructure debt funds (potential 300 basis point reduction).
• Partial credit guarantees could mobilize domestic institutional debt by raising the credit rating of operational assets to AA or higher, though they are currently limited by RBI regulations that cap credit enhancement at two notches or 20% of refinanced debt.

APA

Sen, V., Sharma, K., & Shrimali, G. (2016). Reaching India’s Renewable Energy Targets: The Role of Institutional Investors. Climate Policy Initiative. https://www.climatepolicyinitiative.org/wp-content/uploads/2016/11/Reaching-Indias-Renewable-Energy-Targets-The-Role-of-Institutional-Investors.pdf

Chicago

Sen, Vivek, Kuldeep Sharma, and Gireesh Shrimali. Reaching India’s Renewable Energy Targets: The Role of Institutional Investors. Climate Policy Initiative, 2016. https://www.climatepolicyinitiative.org/wp-content/uploads/2016/11/Reaching-Indias-Renewable-Energy-Targets-The-Role-of-Institutional-Investors.pdf.

Wikipedia

{{cite report |last1=Sen |first1=Vivek |last2=Sharma |first2=Kuldeep |last3=Shrimali |first3=Gireesh |title=Reaching India’s Renewable Energy Targets: The Role of Institutional Investors |publisher=Climate Policy Initiative |date=December 2016 |url=https://www.climatepolicyinitiative.org/wp-content/uploads/2016/11/Reaching-Indias-Renewable-Energy-Targets-The-Role-of-Institutional-Investors.pdf |access-date=17 August 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{sen2016reaching, author = {Sen, Vivek and Sharma, Kuldeep and Shrimali, Gireesh}, title = {{Reaching India’s Renewable Energy Targets: The Role of Institutional Investors}}, institution = {Climate Policy Initiative}, year = {2016}, month = dec, url = {https://www.climatepolicyinitiative.org/wp-content/uploads/2016/11/Reaching-Indias-Renewable-Energy-Targets-The-Role-of-Institutional-Investors.pdf}, urldate = {2026-08-17}, note = {Indexed by Climate Insights Directory} }