India Proposed Renewable Energy Financing Obligation (REFO)

The Ministry of New and Renewable Energy (MNRE) has now proposed a new intervention to boost the flow of financing to the renewable energy sector in the country. This comes as the demand for faster deployment of renewable energy becomes significant keeping in light India’s target of 500 GW of non-fossil fuel in 2030.

Union Minister for New and Renewable Energy Pralhad Joshi recently sparked a new discussion by proposing a Renewable Energy Financing Obligation (REFO). This comes after the country has already tried myriad obligations ranging from Renewable Energy Purchase Obligations (RPOs), Hydro Power Purchase Obligations, and Energy Storage Obligations to Renewable Energy Generation Obligations (RGOs).

The minister in a recent event of financiers organised by Union Ministry of New and Renewable Energy in Mumbai today. Union Minister Joshi also called for collective efforts from financial institutions and policymakers to ensure accessible funding to the Renewable Energy (RE) sector.

He urged banks to simplify financing processes, particularly for rooftop solar projects and called for the introduction of a Renewable Energy Financing Obligation to ensure dedicated funding for the sector, similar to Renewable Purchase Obligations (RPOs) for discoms.

Union Minister of State for Power and New & Renewable Energy Shri Shripad Y Naik said that achieving 500 GW of renewable energy by 2030 will require an investment of approximately ₹30 lakh crore, covering infrastructure, transmission, and storage systems. He urged the stakeholders to adopt innovative financing models, extend flexible lending terms, and prioritize green investments that will accelerate our energy transition.

How hopeful is REFO?

In the past, several obligations regulated to the power sector like RPO and others have struggled to maintain pace with the targets due to several reasons. Several discoms in the country also found paying fines for defiance better than meeting the RPO targets Laxity of the state nodal agencies and discoms to boost renewable energy production and procurement and other regulatory issues often crippled the very spirit behind thee thoughts.

However, the renewable energy deployment indeed witnessed an upsurge with these targets. On the other hand, lending to smaller renewable projects has already been declared as priority sector lending by banks. Financing in the renewable sector has always been an obstacle owing to the variable nature of renewable energy among other. Wit the REFO coming into existence, the financing would see a fillip but all will depend on the willingness of the financial institutions to lend for clean energy projects in the country.