According to reports, Rural Electrification Corp. (REC), a state-owned backer of India’s power sector, plans to lend billions of rupees to clean-energy projects and equipment makers this fiscal year as part of an expanded push into renewables that will also see it issue green bonds overseas.
The non-banking financial company is aiming to triple its clean-energy lending and is expecting to set aside nearly Rs10,000 crore ($1.5 billion) for renewable energy in the financial year ending 31 March, chairman P.V. Ramesh said in an interview.
“We’re not only financing projects but also evacuation infrastructure and have been talking with manufacturers of equipment like wind turbines, solar panels and storage batteries,” Ramesh said in an interview in New Delhi where the lender, which has a loan book of Rs2 trillion, is based.
REC’s renewables strategy underscores a push by companies associated with conventional power to shift resources toward clean energy. The move, which supports Prime Minister Narendra Modi’s climate goals, also comes as some coal-fired electricity generators struggle to service debts.
The lender could issue clean-energy bonds outside India by the end of June, Ramesh said.
“We are also looking at mobilizing resources from raising green bonds in Europe and social impact bonds in Scandinavia,” he said.
Tesla Inc., the maker of electric vehicles, is another company that REC would be interested in backing should it decide to establish a presence in India, Ramesh added. Tesla founder Elon Musk tweeted in February that the company may enter the Indian market this summer.
With demand from equipment manufacturers largely unknown at the moment, lending to the sector would be separate from what REC wants to set aside for renewable projects, Ramesh said.
The shift in lending at REC takes place against a backdrop of an expansion in clean energy led by Modi and his promise to install 175 gigawatts (GW) of renewable capacity by 2022.
Between April 2016 to February, India added 8 GW of new renewable energy, reaching total installed capacity of 51 GW, according to government data. Meanwhile, thermal capacity grew by 8 GW in the same period, 36% lower than the previous year.
Saddled with power plants running under their maximum capacity, India’s thermal-energy producers like NTPC Ltd and RattanIndia Power Ltd have been considering setting up solar-power projects on land initially intended for coal-fired facilities.
REC, which has traditionally financed large-sized power and related infrastructure projects, is customizing products to suit the needs of clean-energy projects, which are often small compared with conventional plants and much quicker to set up, Ramesh said.
“We’re customizing products for each project so it’s tailor-made for each of them because not everyone wants a standard product,” Ramesh said, adding that his company needs to be agile in the new market because the days of lending a billion dollars to a single big project are nearing an end.
REC has been appointed by India’s government as the central agency responsible for implementing two nationwide power reform projects aimed at increasing electricity coverage in rural areas through the Deen Dayal Upadhyaya Gram Jyoti Yojana and the financial turnaround of state-owned power retailers through the Ujwal DISCOM Assurance Yojna (UDAY).