India’s renewable energy sector achieved a remarkable milestone in 2023, witnessing a 60% surge in financing compared to the previous year. According to the Centre for Financial Accountability’s Coal vs Renewables Investment Report, renewable energy projects received exclusive project finance for the third consecutive year, funding 8.77 GW of capacity. Meanwhile, coal-linked companies secured $3 billion (Rs. 25,945 crore) through corporate loans, highlighting a dual growth trajectory in India’s energy landscape.
Renewables dominate project finance in 2023
In 2023, India’s renewable energy financing grew to Rs. 30,255 crore ($3.66 billion), driven by substantial investments in wind and solar energy projects. This marks a sharp rise in capacity funding, which more than doubled compared to 2022. However, despite this growth, the total installed renewable capacity (wind and solar) stood at 118 GW, falling short of the trajectory needed to meet India’s 2030 target of 500 GW in non-fossil fuel capacity.
Primary financing leads the charge
Primary financing for new renewable projects accounted for 77% of all deals, while the remaining 23% went to refinancing. Gujarat led the way among states, securing Rs. 9,857 crore ($1.19 billion) for 2.2 GW of renewable energy capacity, or 25% of all financed projects. Karnataka followed with Rs. 4,593 crore ($556 million) for 663 MW. Solar remained the dominant technology, capturing 49% of the renewable energy deals, with hybrid projects contributing 46% and wind projects just 6%.
Commercial banks boost renewable financing
Commercial banks were pivotal, contributing 68% (Rs. 20,625 crore or $2.49 billion) of total renewable energy loans. Union Bank of India became the largest lender, providing Rs. 4,500 crore ($545 million). The average deal size for renewable sponsors grew by 31%, with the top five sponsors averaging Rs. 4,786 crore ($579 million) per deal.
Coal financing remains significant
Despite no project financing for coal power plants, coal-linked companies received substantial corporate financing, totalling Rs. 25,945 crore ($3.14 billion). Adani Group dominated, securing 65% of these funds. Most of the financing for coal companies came through underwriting services (96%), while direct loans contributed just 4%. US-based banks accounted for 65% of coal-linked corporate financing, with Jefferies Financial Group underwriting over $2 billion for Adani and JSW Energy.
Balancing renewables and coal financing
India’s energy transition faces a dual challenge, balancing growth in renewable energy capacity with sustained corporate investments in coal. While the country’s renewable energy sector is making significant strides, the persistent financial support for coal-linked companies underscores the complexities of aligning economic growth with sustainability goals. The report’s insights call for a more focused approach to prioritising renewables and phasing out coal dependency.
