Solving India’s Renewable Energy Financing Challenge: Which Federal Policies can be Most Effective?

The Government of India has set ambitious targets for renewable energy — a doubling of existing renewable energy capacity to 55,000 MW by 2017. However, unsubsidized renewable energy is still 52-129% more expensive than conventional power, and requires policy support. This policy support is currently provided through a combination of state-level feed-in tariffs and federal subsidies in the form of a generation based incentive, viability gap funding, and accelerated depreciation.

Given the ambitious goals, but limited budgets, the cost-effectiveness of these policies becomes an important criterion for policymakers. In this report, we show that if cost-effectiveness were the only criterion of interest, a class of debt-related federal policies that provide low-cost, long-term debt are more cost-effective than the existing federal policies.