The Clean Energy Investment Trends is a joint project of the CEEW Centre for Energy Finance and the International Energy Agency (IEA). By monitoring market activity and identifying market trends, the project seeks to provide a practical guide to stakeholders for understanding how the interaction between risks and regulations is shaping investment flows. The insights generated from the analyses of financing and market trends could be used to inform future policy action geared towards enhancing investment flows.
Themes examined in the 2019 Clean Energy Investment Trends
The 2019 Clean Energy Investment Trends report maps out the evolution in the renewable power industry and investment landscape through tracking the risk perceptions of debt financiers towards solar photovoltaic (PV) and wind projects over the period from 2014 to 2018 and recent developments impacting the pace of capacity addition. Risk perceptions are analysed through an evaluation of key metrics pertaining to debt financing and capital structure. To assess the relative standing of renewables and thermal assets, this report includes an analysis of thermal projects along the same metrics. The report also takes stock of the impact of a recent policy measure – the imposition of safeguard duties on solar PV cell and module imports – on the pace of project awards. Further, this report contextualises emerging challenges facing the solar park model, which has been a key driver of solar capacity deployment in India’s energy transition.
Key Findings
  • The market concentration of developers sanctioning new solar PV and wind capacity remained high in 2018—above 80% for the top ten firms in both markets. Top companies that can access financing at favourable terms have an advantage in structuring competitive auction bids.
    Both solar PV and wind markets are characterised by high concentration in terms of the sanctioning of new projects (Figures 1 and 2). With declines in tariffs and pressure on margins, companies with access to favourable sources of finance succeed in winning project capacity at competitive auctions. These companies are also better equipped to deal with policy uncertainty associated with the imposition of safeguard duties. At the same time, there has been a notable turnover of top players from year to year, as even the best developers face limitations in continually financing projects. Nevertheless, there were signs of increased consolidation in the wind sector in 2018, with the churn rate dropping considerably from the previous year (Figure 3).
Figure 1: Market concentration in solar energy rose in 2018
Market concentration in solar PV
Source: CEEW and IEA analysis
Figure 2: Market concentration dipped for wind energy in 2018 but remained high
Market concentration in wind
Source: CEEW and IEA analysis
Figure 3: Churn rate for wind dropped considerably in 2018
Churn rate for the top solar and wind developers
  • A maturing market along with reduced risk perceptions and enhanced bankability for renewables has contributed to improved availability and pricing of project debt finance over time, facilitating lower cost investment.
    The capital structure of wind projects remained stable – debt-to-equity ratios averaged 75:25 – but the share of debt rose for solar PV, with more 75:25 structures and instances of higher ratios, namely 80:20 (Figures 4 and 5). Interest rate spreads over bank benchmark lending rates also fell between 75 to 125 basis points for both wind and solar PV between 2014 and 2018 (Figure 6). Loan tenures increased during the period between 2014 and 2018 as lenders became more comfortable in extending longer-term loans (Figure 7).
Figure 4: More debt-heavy capital structures are now common
Classification of projects by debt-to-equity ratio
Source: CEEW and IEA analysis
Figure 5: Shares of debt in capital structures for solar have converged with and even surpassed those for wind
Weighted average debt-to-equity ratio
Source: CEEW and IEA analysis
Note: The debt-to-equity ratio in this chart is weighted by the number of corresponding projects for each year
Figure 6: Interest rate spreads for solar PV and wind have declined
Interest rate spreads - Solar PV and wind
Source: Based on interactions with renewable energy debt financiers and empirical data.
Note: The darker blue line represents the mid-point and the lighter blue area represents the range.
Figure 7: Evolution of loan tenures for solar PV, wind and thermal projects
Median loan tenures for solar, wind and thermal projects
Source: CEEW and IEA analysis
  • Data comparisons with thermal power projects were more challenging, but assets developed by integrated state government–owned utilities appear to benefit from some financing advantages.
    For thermal projects developed by integrated state government–owned utilities, the capital structure is more debt-heavy (80:20) than those for solar PV and wind investments, and loan tenures are longer than those available to other categories of thermal developers. National Thermal Power Corporation (NTPC), a central government–owned public sector undertaking (PSU) and India’s largest thermal developer, relies on the bond market to fund the bulk of its capital expenditure. Therefore, this analysis excludes most of its projects.
  • The weak availability of long-term, fixed-rate debt remains a constraint for all power generation investments, raising uncertainty over future financing costs for new plants and the refinancing of existing ones.
    Long-tenure bank/NBFC- financed debt for renewable energy projects commonly includes provisions for the reset of spreads and refinancing after a certain period. Loans extended to thermal projects developed by private developers and PSUs also include such provisions. Though debt extended to thermal projects developed by integrated state government-owned utilities is structured at a single, fixed rate, it also includes provisions for reset of interest rates.
  • The imposition of safeguard duties and persistent land acquisition and grid infrastructure related challenges under India’s Solar Park scheme, represent near–term risks to the pace of capacity addition.
    The Government of India imposed safeguard duties on solar PV cell and module imports in July 2018. This, along with the associated market uncertainty, has translated into an increase in tariffs discovered at renewable energy auctions from the record lows realised in 2017. This increase in tariffs was the major cause of the cancellation of almost 5 gigawatt (GW) of solar PV projects awarded in 2018, equivalent to about half the total solar PV capacity added in 2018 (Table 1). In addition, challenges in land acquisition and setting up transmission infrastructure have hampered solar park development, with the share of projects awarded at parks in overall capacity awards declining from 54% in 2017 to 24% in 2018, even while the absolute level of solar park capacity awarded remained steady (Figure 8).
Table 1: Awarded solar projects cancelled in 2018
Tendering agency Planned size of tender (MW) Date of award Actual Capacity awarded (MW) Cancelled capacity (MW) Tariffs pertaining to cancelled capacity (INR/kWh)
Gujarat Urja Vikas Nigam Limited 500 March 2018 500 500 2.98-3.06
Solar Energy Corporation of India 275 June 2018 125 125 3.32-3.38
Uttar Pradesh New and Renewable Energy Development Agency 1,000 July 2018 1,000 1,000 3.48-3.55
Solar Energy Corporation of India 3,000 July 2018 3,000 2,400 2.64-2.71
Grid Corporation of Odisha 200 July 2018 200 125 3.19-3.20
Gujarat Urja Vikas Nigam Limited 700 December 2018 700 700 2.84-2.89
Source: CEEW and IEA analysis
Figure 8: Challenges in solar park development have hampered project awards at solar parks
Share of solar parks in overall project capacity awarded (MW)
Source: CEEW and IEA analysis
Note: The capacities included in the chart for 2018 exclude those cancelled after being awarded. This includes 825 MW of solar park projects.
Graphs have been developed using HIGHCHARTS software under the Creative Commons Attribution-NonCommercial 3.0 License

Key Indicators
Market concentration in 2018
for both solar PV and wind auctions
Decline in interest rate spreads
75-125 basis points
for solar and wind from 2014 to 2018
Awarded solar project capacity cancelled
4.85 GW
in 2018
Share of solar parks
in overall solar capacity awarded in 2018