According to IEA, stability of the policy environment and implementation are key for determining the cost and availability of financing for renewables over the medium term.
"India's diverse set of targets and financial incentives support the growth of hydropower, onshore wind, solar PV and bioenergy...," the agency's annual Medium-Term Renewable Energy Market Report said.
The report comes at a time when the government is making efforts to boost renewable energy generation.
Renewables account for more than 70,000 MW of the country's total installed power generation capacity of over 2,50,000 MW.
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Noting that a high cost of capital acts as a factor keeping renewable costs relatively high in India, the agency said the country's interest rate environment is relatively high.
"Domestic lenders still have insufficient familiarity with renewable projects, and requirements for performance history of renewable technologies can slow development," it added.
Among others, the report said concessional loans from the Indian Renewable Energy Development Agency (IREDA), grants under the JNNSM and loans from international development banks, are important to enhance investments.
"Renewables are a necessary part of energy security. However, just when they are becoming a cost-competitive option in an increasing number of cases, policy and regulatory uncertainty is rising in some key markets," IEA Executive Director Maria van der Hoeven said.
Given their capital-intensive nature, renewables require a market context that assures a reasonable and predictable return for investors, she noted.
Renewable energy generation worldwide is projected to rise by 45 per cent and account for about 26 per cent of global electricity generation by 2020.