Getting to India’s Renewable Energy Targets: A Business Case for Institutional Investment

India requires approximately USD 450 billion in additional capital by 2040 to reach a renewable energy capacity of 480 GW. The report argues that the sector has matured from a high-risk, high-growth stage to a low-medium risk profile with predictable yields, making it highly attractive for institutional investors such as pension funds and insurance companies. While India offers higher excess returns (3.5%) than the US (2.4%) and China (1%), significant barriers persist, most notably off-taker risk from DISCOMs, currency devaluation, and a lack of liquid financial securities. The authors propose solutions including transparent payment security mechanisms, FX hedging facilities, and the securitization of loan portfolios to attract large-scale institutional capital.

• India needs an estimated cumulative investment of approximately USD 450 billion between 2016 and 2040 to achieve a renewable energy capacity of roughly 480 GW.
• The Indian renewable energy sector has transitioned from an early-stage, high-risk investment opportunity to one characterized by low-to-medium risk and medium-to-high growth, resembling yield-generating investments.
• On a risk-adjusted basis, India provides higher excess returns at 3.5%, compared to 2.4% in the United States and 1% in China.
• Renewable energy projects demonstrate significantly greater cash flow stability than fossil fuel power plants; solar and wind exhibit cash flow variability of 10% and 20% respectively, compared to 40% for coal.
• The investment profiles of domestic pension funds and insurance companies align well with renewable energy in terms of return, risk, and long-term horizons, but are hindered by regulatory restrictions on credit ratings and liquidity.
• For foreign institutional investors, the sector has shifted toward larger investment sizes with moderate returns (dropping from 20% to 15%), which still meets their India market portfolio requirements.
• The most severe barrier to investment is off-taker risk, driven by the financial instability of state distribution companies (DISCOMs), which had accumulated losses of INR 3.8 lakh crore and debt of INR 4.3 lakh crore as of March 2015.
• Other critical barriers include currency risk for foreign investors, low credit ratings (often below the AA minimum required by institutional investors), and a lack of liquid financial securities.
• Proposed solutions to mobilize capital include implementing transparent payment security mechanisms, creating FX hedging facilities backed by tail risk guarantees, and encouraging the securitization of renewable energy loan portfolios by banks and NBFCs.

APA

Jena, L. P., Meattle, C., & Shrimali, G. (2018). Getting to India’s Renewable Energy Targets: A Business Case for Institutional Investment. Climate Policy Initiative. https://www.climatepolicyinitiative.org/wp-content/uploads/2018/03/Getting-to-Indias-Renewable-Energy-Targets-A-Business-Case-for-Institutional-Investment.pdf

Chicago

Jena, Labanya Prakash, Chavi Meattle, and Gireesh Shrimali. Getting to India’s Renewable Energy Targets: A Business Case for Institutional Investment. Climate Policy Initiative, 2018. https://www.climatepolicyinitiative.org/wp-content/uploads/2018/03/Getting-to-Indias-Renewable-Energy-Targets-A-Business-Case-for-Institutional-Investment.pdf.

Wikipedia

{{cite report |last1=Jena |first1=Labanya Prakash |last2=Meattle |first2=Chavi |last3=Shrimali |first3=Gireesh |title=Getting to India’s Renewable Energy Targets: A Business Case for Institutional Investment |publisher=Climate Policy Initiative |date=March 2018 |url=https://www.climatepolicyinitiative.org/wp-content/uploads/2018/03/Getting-to-Indias-Renewable-Energy-Targets-A-Business-Case-for-Institutional-Investment.pdf |access-date=23 October 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{jena2018getting, author = {Jena, Labanya Prakash and Meattle, Chavi and Shrimali, Gireesh}, title = {{Getting to India’s Renewable Energy Targets: A Business Case for Institutional Investment}}, institution = {Climate Policy Initiative}, year = {2018}, month = mar, url = {https://www.climatepolicyinitiative.org/wp-content/uploads/2018/03/Getting-to-Indias-Renewable-Energy-Targets-A-Business-Case-for-Institutional-Investment.pdf}, urldate = {2026-10-23}, note = {Indexed by Climate Insights Directory} }