Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/238435 
Year of Publication: 
2020
Series/Report no.: 
ADBI Working Paper Series No. 1078
Publisher: 
Asian Development Bank Institute (ADBI), Tokyo
Abstract: 
India needs to considerably accelerate its solar and wind energy capacity addition in order to meet its renewable energy (RE) capacity deployment targets. Besides policy commitments, the cost-competitiveness of RE tariffs is a major determinant of capacity addition. This paper focuses on the major determinants of RE tariffs, disaggregating the impact of equipment-related factors and financing costs (costs of debt and equity). The paper finds that financing costs account for the largest component - over 50% of RE tariffs. Further, equipment-related factors have been the major drivers of tariff reduction historically, accounting for 73% of the solar tariff reduction between January 2016 and May 2017. However, the paper demonstrates that there could be a role reversal - changes in financing costs could drive future decreases in both solar and wind tariffs. This necessitates the de-risking of these sectors through suitable policy- and market-led interventions in order to lower financing costs.
Subjects: 
renewable energy
solar and wind tariffs
India
JEL: 
Q20
Q27
Creative Commons License: 
cc-by-nc-nd Logo
Document Type: 
Working Paper

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