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Issue Brief

A Second Wind for India’s Energy Market

Financing Mechanisms to Support India’s National Wind Energy Mission

Rishabh Jain, Arunabha Ghosh, Rajeev Palakshappa, Poulami Choudhury
August 2014 | Sustainable Finance

Suggested Citation: Ghosh, Arunabha, Rajeev Palakshappa, Poulami Choudhury, and Rishabh Jain. 2014. A Second Wind for India’s Energy Market: Financing Mechanisms to Support India’s National Wind Energy Mission. New Delhi; New York: The Council on Energy, Environment and Water and Natural Resources Defense Council.


This issue brief, in collaboration with the Natural Resources Defense Council, analyses the growth of India’s wind energy market with a focus on financing mechanisms. It provides an overview of various financial mechanisms, such as private equity funding, non-recourse financing, green bonds, and initial public offerings being used in India and other countries. Further, it provides insights on wind financing policy evolution from 1987 to 2014.

In 2014, India’s renewable energy capacity is nearly 13 percent of the total generation capacity. Of the total renewable energy generation, wind energy currently makes up the majority with nearly 70 percent. According to the Ministry of New and Renewable Energy (MNRE), in 2010, the wind energy industry was estimated to be employing 42,000 people in India. An additional 60,000 wind energy jobs will be needed by 2020. This report provided insights on strong policy support required to strengthen India’s wind energy market.

This report is a part of the India Clean Energy Finance series which also includes Reenergising India’s Solar Energy Market through FinancingGreening India’s Financial Market: How Green Bonds Can Drive Clean Energy DeploymentGreening India’s Financial Market: Opportunities for a Green Bank in India.

Wind Installed Capacity has grown steadily in India

Source: National Institute of Wind Energy (NIWE), Wind Power installed capacity (MW) in India

Key Highlights

  • The primary reasons for the declining investments in India’s wind energy market are uncertainty around long-term policies and incentives such as Accelerated Depreciation (AD) and Generation Based Incentives (GBI).
  • Relatively high cost and low availability of debt in India increased the cost of renewable energy projects. This presented a major barrier to expanding the wind energy market.
  • Conducive land acquisition policies, as in the states of Gujarat and Rajasthan, are vital for attracting investments in the wind energy market.
  • Consistent policy signals and strong implementation mechanisms that incorporate multi-stakeholder views was essential to advance wind energy and for drafting the National Wind Energy Mission.
  • Wind power deployment in 2012 and 2013 dropped by 18 per cent and 42 per cent, respectively, as compared with 2011.
  • Many states increased their wind power tariff by 2 to 15 per cent to attract investments. This shifted wind power projects from resource-rich states like Tamil Nadu and Gujarat and low-density states like Rajasthan, Madhya Pradesh, and Maharashtra.
  • Poor enforcement of Renewable Purchase Obligations (RPOs) and uncertainty about the future of Renewable Energy Certificates (REC) after 2017 reduced lender confidence in the REC mechanism.
  • United States has the second-most wind energy with 60 GW installed capacity, followed by Germany with 32.4 GW and Spain with 22.9 GW.

Key Recommendations

  • Enable strong and stable policy and enforce compliance directives to reinvigorate and sustain the market.
  • Improvise state government policies to effectively designate land for wind energy development while remaining responsive to local sensitive issues and other requirements.
  • Focus on additional financing incentives and measures, land acquisition policies, and enforcement of RPOs to meet India’s wind energy potential.
The relatively high cost and low availability of debt in India has significantly increased the cost of renewable energy projects, which presented a major barrier to the expansion of the wind market.

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