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As on March 31, 2012, installed capacity of renewable energy based power generation was 24,503 MW, which is about 12 percent of the total installed capacity of 199,626 MW. The major renewable energy sources (RES) are wind energy, solar energy, biomass & waste energy, and small-hydro energy.

Highlights of the Indian Renewable Energy Market

Highlights of the Indian Renewable Energy Market A number of facts and factors make the Indian renewable energy market exciting for entrepreneurs and investors. Here are some highlights:

  • India is the most developed renewable energy market in South Asia, with annual revenues of about USD 185 billion.
  • It is the third most attractive country to invest in renewable energy, according to Ernst & Young.
  • The overall demand-supply gap in the energy sector is expanding due to an increase in the population’s standard of living. The demand-supply gap in power is currently at 10.3 percent and is one of the key drivers of renewable energy.
  • The utilization of renewable energy sources is still relatively low in India, thus presenting excellent business potential.
  • The Indian government expects the sector to grow to USD 19 billion, between 2008 and 2012, with renewable energy making up 20 percent of the 70,000 MW of total additional energy planned from 2008-2012.
  • India has been attracting over USD 3 billion investment every year in renewable sector.
  • The country is emerging as one of the largest potential sources of Certified Emission Reduction (CER) and Renewable Energy Certificates (REC).

Government Incentives

Government Incentives In the early 1980’s, the Ministry of New and Renewable Energy (MNRE) was established to encourage diversification of the country’s energy supply and to satisfy the increasing energy demand of a rapidly growing economy. The MNRE issued guidelines to all state governments to create an attractive environment for the export, purchase, wheeling and banking of electricity, generated by renewable power projects. Some of the other key incentives provided by the Government of India for the renewable energy industry are:

  • Feed-in-tariffs for both wind and solar energy
  • Up to 80 percent accelerated depreciation for renewable energy investments
  • Preferential tax rate of 15 percent, instead of the standard 30 percent
  • Exemption from Central Sales Tax and customs duty concessions on soft loans for the import of material, components, and equipment used in renewable energy projects
  • Establishment of the National Solar Mission (NSM), which aims to deploy 20 GW of solar energy by 2020
  • Soft loans for setting up renewable energy enterprises
  • Tax holiday for 10 years for Biomass power projects


Renewable energy investment in India was the second fastest-growing among the G-20 in 2011, with investments increasing 54 percent to USD 10.2 billion. Wind resources received 45 percent of the financing (USD 4.6 billion), while 41 percent (USD 4.2 billion) went to solar. This growth propelled the country from the 10th to the sixth place in the G-20; it now ranks fifth in terms of five-year investment growth.

Foreign Direct Investment (FDI)

The Indian government allows 100 percent foreign direct investment (FDI) in the renewable energy sector and has put in place favorable policies to attract foreign companies into the sector.


Outlook Developing renewable energy can help India increase its energy security, reduce adverse impacts on the local environment, lower its carbon intensity, contribute to a more balanced regional development and realize its aspirations for leadership in high-technology industries. According to a KPMG report, India is the third most favoured destination globally, for investments in the renewable energy sector. The report also says that the country will be a major source of new entrants into the sector, after the US and China. The Indian renewable energy market has become increasingly dynamic in recent years as a result of strong natural resources, greater accommodation to international investments and a variety of government incentives. Solar and wind energy will be the major areas to witness overseas investments and acquisitions in the near future.

With all the attractive characteristics and potential stated above, India presents a significant market opportunity for renewable energy firms worldwide. However, these firms will need external guidance and assistance on several strategic and operational aspects before they are in a position to effectively tap into this opportunity.