Sovereign wealth funds and public pension funds are playing a major role in India’s ambition to increase renewables to 50% of electricity generation by 2030.

This week, India’s National Investment and Infrastructure Fund’s (NIIF) Ayana Renewable Power announced it had partnered with Greenko – backed by Singapore’s GIC and Abu Dhabu’s ADIA – to store 6GWh of power in hydro pump storage plants that Greenko is building at Pinnapuram in Andhra Pradesh. Th deal positions the quasi-sovereign fund the NIIF at the heart of India’s green energy transformation.

Greenko has India’s largest operational renewables energy portfolio of 7.3GW and is building 30GWh of storage capacity as part of its target of 100GWh of storage capacity. The 2022 Union budget has included energy storage systems such as dense charging infrastructure and grid-scale battery systems in the harmonized list of infrastructure, making it easier for such projects to raise funds.

The objective of the deal is to provide a more reliable source of green energy to distribution companies (discoms), enhancing the contribution of renewables to stable electricity supply. Large storage facilities can help keep India’s power grids stable, given electricity is produced intermittently from clean energy sources such as solar and wind.

India has said it will meet net zero emissions by 2070. With a population of 1.38 billion and growing, India is the world’s fourth biggest emitter after China, the US and the European Union. Yet, it has some of the lowest per capita carbon dioxide emissions, at 1.9 tonnes per person in 2019 compared with 5.5 tonnes in the UK and 16 tonnes in the US. Prime Minister Narendra Modi has nevertheless declared that 50% of the country’s electricity supply will be comprised of renewables by 2030, which would entail an increase in the sector’s generation capacity from 134GW today to 500GW by the end of the decade.

State-owned investors (SOIs) are playing a major role in assisting India in meeting its ambitious targets, with Greenko, Azure Power and ReNew Power the main vehicles for investment. Global SWF estimates that SOIs have invested around US$5 billion into India’s renewables energy sector, a third of which comes from GIC with Canada’s CDPQ contributing 22% and ADIA 19%

Yet, progress is currently lagging government targets due to bottlenecks in the electricity grid and a lack of power purchase agreements. On top of these challenges is the government’s efforts to boost local manufacturing of solar power equipment through the imposition of customs tariffs, which risks dampening investor interest due to possible higher costs. Covid-19 has merely added to the problems facing the sector, with disruption to supply chains and travel as well as slower consumption growth.

Global SWF previously highlighted the problem of outstanding payments to solar power generation companies by cash-strapped distribution companies in India, which is eroding foreign investor confidence in the sector and could potentially hit the earnings of foreign state-owned investors.

Related funds ADIA CDPQ GIC NIIF