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India's wind and solar energy financing policies are not as cost-effective as they could be, according to a joint study conducted by US-based think-tank Climate PolicyInitiative (CPI) and Indian School of Business (ISB).
The report, titled "SolvingIndia's Renewable Energy Financing Challenge: Which Federal Policies can be Most Effective", was released today. It says a policy that both reduces thecost of debt and extends its tenor is the most cost-effective.
For wind energy, reducing debt cost to 5.9% and extending tenor by 10 years can cut thecost of total government support by up to 78%.
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For solar energy, whichis more capital-intensive, reducing debt cost to 1.2% and extendingtenor by 10 years can cut the cost of support by 28%.
"Although there areno clear winners across all criteria, our analysis presents policymakers withcrucial tradeoffs that would enable them to choose appropriate federal policiesbased on relevant policy goals," CPI senior director David Nelson said.
The report finds policy options such as interest subsidies are more attractive than existing policies. For wind energy, compared to the existing Generation-Based Incentive (GBI) of Rs 0.5 per unit, an interest subsidy of 3.4% would be 11% lessexpensive and support 83% more deployment.
Similarly, for solar energy projects, as compared to the current policy of 30% viability gap funding,an interest subsidy of 10.2% would be 11 percent less expensive and support 30% more deployment.
The report is part of a series on renewable energy financing in India. India targets to double renewableenergy capacity to 55,000 Megawatt over four years through 2017.
