India leads world in growth of energy sector investments between 2015-18

Flows into the sector expand by 12% in calendar 2018 alone, India is outlier since energy sector investments elsewhere have either stagnated or decelerated

Growth in energy sector investments was the most pronounced in India compared to any other region in the world between 2015 and 2018.

Data compiled by the International Energy Agency (IEA) showed that India’s energy sector investments expanded by 12 per cent in calendar 2018 alone. During 2015-2018, investments flowing into the country's energy sector are estimated to have grown by seven per cent CAGR (compounded annual growth rate). Investments, including private foreign capital, poured into areas like coal supply, oil & gas, energy efficiency, renewable power, electricity networks, thermal power and renewables for transport or heat.

In terms of volumes of energy-centric investments, India ranked fourth - behind China, United States (US) and Europe but raced ahead of South East Asia and sub-Saharan Africa regions. India is the outlier since energy sector investments in rest of the geographies have either stagnated or decelerated.

A report by the US-based think-tank, Institute for Energy Economics & Financial Analysis (IEEFA), notes that the tender outcomes at India’s solar and wind power auctions have offered constant evidence of global private capital chasing the country’s planned projects. Major international investors such as SoftBank, Brookfield (a leading alternative asset manager), leading Japanese conglomerate ORIX and Sembcorp have loosened their purse strings to fuel India’s appetite for renewable growth.

SoftBank led by Japan’s Masayoshi Son, is investing heavily in India’s renewable energy portfolio through its energy arm SB Energy. The company owns more than 3,000 Mw of renewable capacity under development awarded through competitive reverse biding auctions. Endorsing the deflationary nature of the Government of India led International Solar Alliance (ISA), Softbank chief executive officer Masayoshi Son went so far as to promise free power from its solar plants in India to ISA member countries after the completion of the asset’s initial 25-year Power Purchase Agreement (PPA) period. SoftBank recently invested $250 million in Ola Electric, an electric mobility service company. Established in 2017, SoftBank has already valued the company at $1 billion.

Brookfield, one of Canada’s leading alternative asset managers with $365 billion of assets under management (AUM), is reported to be in the process of acquiring a 210 Mw wind farm from Axis Energy for Rs 500 crore. In 2017, it acquired SunEdison’s 300 Mw of solar assets in India. Axis Energy’s wind assets will take Brookfield’s India power capacity to 510 Mw.

ORIX, a Japanese financial services and asset management company, owned a 49 per cent stake in a total of 874 Mw of wind power projects with India’s debt-strapped Infrastructure Leasing and Financial Services (IL&FS). ORIX is now looking to buy the final 51 per cent stake in the projects.

Likewise, Singapore based integrated energy player Sembcorp plans to invest more in its Indian subsidiary Sembcorp Energy India Limited (SEIL). The company owns 1,700 Mw of capacity in India including 550 Mw under development, as of June 2019.

Tim Buckley, director of energy finance studies, IEEFA said, “There has been clear momentum in India’s renewable energy capacity building in the last 24 months, leveraging the expanding opportunities in deflationary sustainable domestic projects. The country has a clear ambition to transition to a cheaper lower emission electricity system, and that ambition is attracting healthy global investment. Global capital flows will into India will accelerate as long as the Indian government provides a clear policy framework and puts in place measures to lower risks and protect investor confidence.”

In its report, IEEFA estimates that India needs $500-700 billion in renewable energy and supporting grid investment over the coming decade in order to meet its renewable energy targets.