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Coal Draws A Blank For Second Year, Renewables Dominate

By Outlook Planet Desk December 09, 2023

India bucks the trend, leaving coal behind for a second year. Renewables take centre stage, with solar leading the charge, fuelled by their cost-effectiveness and a shift in bank investments

Coal Draws A Blank For Second Year, Renewables Dominate
Solar emerged as the dominant renewable energy source, attracting 40 percent of financing and funding 1,849 MW projects. Shutterstock
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Despite India not signing the COP28 pledge for tripling global renewable energy by 2030, a recent report reveals a continued shift towards cleaner energy sources. No coal power plant secured project finance lending for the second consecutive year in India.

The 2023 Coal vs Renewables Investment Report, authored by the Centre for Financial Accountability (CFA) and Climate Trends, analysed 68 project finance loans across 11 energy projects in India during 2022. Notably, all projects with financial closure were for renewable energy, highlighting a shift in lender preferences.

However, the report also found a 45 percent decline in project finance for renewable energy compared to 2021. This could be attributed to factors like pandemic-induced project delays, supply chain disruptions, and rising interest rates.

Solar emerged as the dominant renewable energy source, attracting 40 percent of financing and funding 1,849 MW projects. On the other hand, wind power accounted for only 4 percent of renewable energy lending, financing just 144 MW.

The report also emphasises the cost advantage of renewable energy. Recent data indicates that new coal plants cannot supply power under Rs 5/kWh, while renewable energy paired with storage can offer rates between Rs 2 and 3.5/kWh.

This cost-effectiveness discourages investments in coal projects, as evidenced by most new plants built by government entities. Even pithead coal plants struggle to compete with round-the-clock renewable bids in the Rs3–4/kWh range.

Commercial banks were the primary lenders, providing 68 percent of overall funding through five deals. Coöperatieve Rabobank UA emerged as the largest lender, offering a loan worth Rs7,749 crore.

The report recommends that as financial institutions move away from coal, policy and regulations should support increased funding for renewable energy projects. This will encourage the transition towards cleaner energy sources and contribute to India's ambitious renewable energy goals.

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