The Clean Energy Investment Trends series provides a unique benchmark for monitoring and assessing progress in the investments required to meet India’s sustainability goals. Now in its fourth edition, this joint project of the Council on Energy, Environment and Water’s Centre for Energy Finance (CEEW-CEF) and the International Energy Agency (IEA) continues to evolve to better track the key market, investment framework and financial performance trends that are central to mobilising capital at scale for renewable energy (RE). It provides insights for policymakers, industry actors, and financiers on the critical risks and opportunities for investment, as well as draws implications for future policy action and business decisions.

The 2021 edition of Climate Policy Initiative’s Global Landscape of Climate Finance again provides a comprehensive overview of global climate-related primary investment. It uses two-year averages (2019 and 2020) to smooth out annual fluctuations in data.

KEY FINDINGS:

Total climate finance has steadily increased over the last decade, reaching USD 632 billion in 2019/2020, but flows have slowed in the last few years. This is a worrying trend given that COVID-19’s impact on climate finance is yet to be fully observed. The increase in annual climate finance flows between 2017/2018 and 2019/2020 was only 10% compared to previous periods, when it grew more than 24%.

An increase of at least 590% in annual climate finance is required to meet internationally agreed climate objectives by 2030 and to avoid the most dangerous impacts of climate change.

Adaptation finance continues to lag. Finance for adaptation increased by 53% reaching USD 46 billion in 2019/2020 compared to USD 30 billion in 2017/2018. Despite this positive trend, total adaptation finance remains far below the scale necessary to respond to existing and future climate change. UNEP’s Adaptation Gap Report (UNEP, 2021) estimates that annual adaptation costs in developing economies will be in the range of USD 155 to USD 330 billion by 2030.The public sector continues to provide almost all adaptation financing, with adaptation increasingly being prioritized in development finance climate portfolios, yet adaptation finance represented just 14% of total public finance. Moreover, data on adaptation finance from the private sector is still largely missing.

This study assesses a least-cost and operationally feasible pathway for India’s electricity grid through 2030 that validates—and surpasses—India’s 2030 target of 500 GW of installed non-fossil capacity. The study uses the latest RE and battery cost data, an industry-standard power system modeling platform (PLEXOS), and exhaustive analytical methods (optimal capacity expansion and power plant-level hourly grid dispatch simulations). It finds that the least-cost resource mix to meet India’s load in 2030 (the “Primary Least Cost Case”) consists primarily of a combination of RE and flexible resources as follows: 465 GW of RE (307 GWDC solar, 142 GW wind, and 15 GW other RE), 63 GW (252 GWh) of battery storage, 60 GW of load shifting to solar hours (50 GW agricultural + 10 GW industrial), and flexible operation of the existing natural gas fleet of 25 GW. 

This report frames current policy and market dynamics while placing the recent rise in energy and commodities prices in context. In addition to providing detailed market analysis and forecasts, it also explores trends to watch including storage, producing hydrogen from renewable electricity, stimulus packages, aviation biofuels and residential heating

The report notes that ancillary services’ current market design and structure need to be enhanced to manage imbalances efficiently at the state boundary. Efficient market design where energy and ancillary services are co-optimized will encourage investments in flexible resources for imbalance management. Even with large balancing areas facilitated by the market-based economic dispatch (MBED) mechanism, investment in flexible assets is required to achieve reliable grids.