India’s renewable energy sector faces financing challenges that could undermine its 2030 targets, prompting a review of cost of capital dynamics across utility-scale solar and wind projects to address gaps in understanding how financing costs evolve with market maturation and policy intervention, according to a study.
The research was conducted by Saurabh Trivedi, a a Sustainable Finance Specialist at IEEFA and Gireesh Shrimali is the Head of Transition Finance Research at the Oxford Sustainable Finance Group.
“We synthesise evidence from six estimation methodologies, analyse risk drivers through four comprehensive studies, and trace policy evolution over 15 years in this discussion paper,” the authors noted. “Together, these reveal a fundamental tension in cost of capital research: approaches based on actual project-finance data offer high precision but limited scalability while survey methods and financial market proxies provide broader coverage at the expense of accuracy.”
Historical trends point to a complete financing cycle rather than steady improvement. Multiple estimation methods show WACC compression of 300–400 basis points between 2012 and 2020, driven by market maturation, followed by a 320-basis-point expansion through 2024 as global monetary conditions tightened. Meanwhile, wind’s historical financing premium over solar has disappeared as both technologies now access identical debt pricing ranges of 8.5–9.75%.
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