IREDA seeks global funding tie-ups to lower financing costs for India clean energy projects

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IREDA global funding for renewables

Highlights

IREDA is seeking partnerships with global banks and multilateral lenders to secure long-term green funding at lower costs for Indian clean energy projects.
Indian renewable developers face high borrowing costs of 11%–12%, compared to developed markets' 2%–3%, despite a $220 billion investment need by 2027 for 500 GW capacity.
Transmission infrastructure constraints are forcing project delays and curtailments, leading to lower generation, cash flow pressure, and higher financing risks for developers.

Funding strategy for renewable expansion

As reported by Reuters, Indian Renewable Energy Development Agency Ltd is seeking partnerships with global banks, institutional investors and multilateral lenders to secure long-term green funding at more competitive rates for domestic companies.

Tusarkanta Parida, an executive director at IREDA, said at the Bharat Renewable Energy Summit on Wednesday that the state-run lender is looking for tie-ups to raise more green finance at lower cost. He did not identify the institutions involved in the proposed partnerships.

Indian renewable energy developers have long complained that borrowing costs of about 11% to 12% remain far above the 2% to 3% financing costs typically available in developed markets. Parida said project finance needs to become easier as India pursues one of the world's largest renewable energy expansion programmes.

Cost pressures and grid constraints weigh on developers

Government estimates show India will need $220 billion of investment over the next three years to meet its target of 500 gigawatts of non-fossil fuel power capacity by 2030. The country attracts about $64 billion of private investment into clean energy between 2024 and 2026, including $6.2 billion in foreign investment.

Developers are also dealing with land acquisition hurdles and power curbs caused by inadequate transmission infrastructure. India's grid struggles to keep pace with rapid renewable energy capacity additions, forcing some projects to waste generated electricity or wait for transmission links before moving ahead.

Kailash Vaswani, chief financial officer of ReNew Energy Global, said such disruptions can damage project finances because developers do not assume curtailment when planning projects. Lower generation cuts cash flow, making debt servicing and repayment harder while raising borrowing costs and limiting the ability to secure fresh debt or equity.

In our earlier article on rising sovereign borrowing risks in a higher-rate environment, we noted that persistent geopolitical shocks and elevated fiscal spending can keep inflation and funding costs high. We also pointed out that emerging and frontier markets are especially exposed because interest-service burdens tend to be heavy relative to narrower revenue bases, increasing refinancing strain.

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