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 renew- able 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 the previous work, demonstrated that unfavorable debt terms add 24-32% to the cost of renewable energy in India. In this report, 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.