Clean Energy, 2023, Vol. 7, No.

5, 1069–1077

https://doi.org/10.1093/ce/zkad052
Advance access publication 7 October 2023
Research Article

Strategic recommendations for financing green and

sustainable energy projects
Arindam Dutta*, and Akash Samanta

Department of Energy Management, Indian Institute of Social Welfare and Business Management, India
*
Corresponding author. E-mail: arindamd@iiswbm.edu

Abstract

Downloaded from https://academic.oup.com/ce/article/7/5/1069/7297644 by guest on 02 January 2024

The main hindrances to the large-scale development of renewable-energy projects are the lack of bankability and the inability to
align investments and investors with suitable financial instruments or robust policy measures. To illustrate a bankable project, this
paper presents a research-based case study on the installation of solar photovoltaic panels on the rooftops of 195 trains of the Indian
Railways. Detailed information on the annual running hours, exposure to sunlight, efficiency of solar photovoltaic generation and
electrical power demands of each rail coach is considered to conduct a quantitative measure of the tentative amount of fossil fuel sav-
ings. The purpose is to provide insight into the types of renewable-energy projects that can be highly attractive to financial institutions
and promoters due to their lucrative internal return on investment. As seen in this case study, there are annual savings in diesel of
12 323 088 litres and a CO2 reduction of 32 755 tonnes, with return on investment of 1.3 years. Furthermore, this study conducts a com-
prehensive analysis of the limitations of existing renewable-energy project financing mechanisms in India. Subsequently, three policy
measures are recommended to develop a robust financial mechanism that can effectively meet the needs of investors and investors.
These measures include increasing equity injection through a buy-and-hold strategy, providing direct tax benefits to promoters and
financing through real-estate investment trusts. The findings are highly relevant to address the challenges associated with bridging the
financial gap between access to finance and capital investment in the renewable-energy sector, especially for Asian countries.

Graphical Abstract
Renewable
energy
projects Bankability
alignment of investments
and investors

Investment

Yearly running hours ROI 1.3 years

Exposure to sunlight
CO2
SPV Generation efficiency
Savings
Electrical power demands

Received: 22 February 2023. Accepted: 30 June 2023

© The Author(s) 2023. Published by Oxford University Press on behalf of National Institute of Clean-and-Low-Carbon Energy
This is an Open Access article distributed under the terms of the Creative Commons Attribution-NonCommercial License (https://creativecommons.org/
licenses/by-nc/4.0/), which permits non-commercial re-use, distribution, and reproduction in any medium, provided the original work is properly cited. For
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1070 | Clean Energy, 2023, Vol. 7, No. 5
Keywords: rooftop solar; railways; fuel saving; return on investment; bankable project; equity funding; debt funding; renewable
energy
Introduction
The decarbonization of the transportation sector is essential to
address issues such as environmental pollution, global warming
and energy dependence. According to the US Energy Information
Administration (EIA) [1], ~28% of total US energy consumption
in 2019 was used in the transportation sector and almost 92% of
the energy was from sources based on fossil fuels. The Bureau
of Energy Efficiency, India reported that the transportation sector
of India was responsible for almost 18% of the total energy con-
sumption in 2021 [2]. Taking into account the same growth rate,
the projected requirement would be ~200 million tonnes of oil
equivalent (Mtoe) of energy stock in 2030 [2]. Due to significant
efficiency improvement, electrification and greater use of green
fuels in the last two decades, global CO2 emissions from the
transportation section have increased at a much slower pace
compared with the 2000 level. According to the recent EIA report
[3], >37% of the direct CO2 emissions came from fuel combustion
in the transportation sector in 2021. Typically, India imports >90%
of its total crude oil from foreign nations. The railway transport
system in India is responsible for a significant percentage of total
energy consumption and CO2 emissions in the transport sector.
Therefore, the continued increase in energy demand, pollution
level and price of conventional fossil fuels highlight the need
for greater energy efficiency and greater penetration of green
energy in the transportation sector. Researchers also anticipate
that with the use of renewable energy (RE) in transportation, al-
most 40% of greenhouse gas emissions can be subsided [4]. Due
to Asia’s largest railway network with 115 000 track km, 8500 sta-
tions and operating ~12 000 trains per day [5], Indian Railways
(IR) is considered one of the largest fossil fuel consumers in India.
On average, ~2.7 billion litres of diesel are consumed by IR every
year [6]. The parallel adoption of electronic transportation and
large-scale integration of RE sources into the transportation
system will eventually decarbonize the transportation sector.
This will not only reduce greenhouse gas emissions, but also re-
duce the dependence on non-RE. Alongside this, it will also im-
prove energy security while developing a green and sustainable
transportation sector.
Using lessons learned from the global crisis, the Government
of India (GoI) continuously puts its effort into mobilizing the RE
sector through awareness programmes and developing strategic
policy and regulatory measures. However, the primary inten-
tion of most recent policy measures was to fulfil the GoI’s vision
to produce 450 GW RE installed capacity by 2030. With regard
to this, a fund of almost $189 billion [7] is expected to be required to
meet the 175-GW RE target. To date, projects in the RE sector are
primarily funded by the private sector through various banking
institutions to mobilize the necessary finance [8]. However, due to
the high risk and uncertainties of lucrative return on investment
(ROI), financial institutions have paid very little attention to this
kind of project. In addition, a larger portion of RE project funds is
mobilized through third-party investors, such as private investors
and foreign investors. This further discourages banks to offer the
required debt financing to an RE project due to the lack of equity
investment by the project developer itself. In summary, financing
eco-friendly projects is the biggest concern owing to the high ini-
tial investment, low internal rate of return and ROI, and higher
payback period. To get proper funding, the proposed RE project
must have a lucrative ROI. In this article, a research case study
of the greening transport sector is presented with a detailed eco-
nomic analysis to provide a guideline to the investor and financial
institutions to speed up the development of green and sustain-
able transportation sector projects by extending higher financial
support. Here, we also discuss a comparative analysis of various
financial strategies practised in India. Moreover, the major con-
tribution of this research is a financial roadmap consisting of
three innovative financial strategies that lead to effective funding
for RE sector projects. Among several other sectors of e-mobility,
the penetration of green energy in railway transportation is con-
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sidered in this study as an example only. Although this study pre-
sented a case study based on the IR system, the analysis methods,
general outcomes and financing strategies are very applicable to
other green energy projects around the world.
1 State of the art
Like Italy [9], France, the USA and several other countries, India
started to use the rooftop spaces of trains to generate electrical
power using solar photovoltaic (SPV) panels in 2011 [10]. IR first
installed a 1-kW SPV panel on the roof of trains in Punjab, India
and later on Kalka-Simla narrow-gauge rail coaches in Himachal
Pradesh, India for experimental purposes. Although these experi-
ments were successful, the results are not publicly available for
further research and development. However, these experiments
showed the way to extend the research to the next level. Similar
success stories are also available in Iran and South Africa. The
study [11] carried out on the railway network of Iran showed that
~74% and ~25% of the power requirements of rail coaches can be
generated from rooftop SPV systems during summer and winter
seasons, respectively. They also presented statistics on the miti-
gation of CO2 emissions and green energy generation. Lencwe
et al. [12] presented a notion of SPV integration on locomotive
rooftops for the South African railway industry [12]. Although
the study demonstrated the impact of temperature on energy
generation from the rooftop SPV modules and anticipated the
possibility of significant energy, cost and carbon savings, the au-
thors did not present statistical data. A similar study on South
African railways was presented in [13] and an SPV- and energy
storage-based auxiliary power supply system was presented
on a passenger train. This study provided the technical details
of an on-board SPV-assisted auxiliary power system, including
the structure, maximum power point tracking algorithm, en-
ergy management and stability control strategy. The feasibility
study of installing SPV modules on the top of train coaches in
IR was carried out by Vasisht et al. [14], Darshana et al. [15] and
Shravanth et al. [5] supported by adequate field data acquired
through implementing prototype SPV systems on rail coaches.
The energy generated from the rooftop SPV systems on the rail
coaches depended on several factors such as the total travel time
in the Sun, solar insolation, climatic conditions, travel direction,
number of stops, speed of the vehicle and the technology of the
SPV panels. Among all these factors, the total travel time during
the day most significantly influenced the total amount of en-
ergy generated by the rooftop SPV system. However, most studies
only considered a couple of trains as a sample to estimate the
total running times of all trains in India. Although these studies
 Strategic recommendations for financing green and sustainable energy projects |
demonstrated numerous savings in fossil fuel and CO2 emissions
with the integration of solar energy in rail transportation, their
expected results are likely to be far from reality. This is because
the total run hours of a train depend on the distance travelled,
departure and arrival times, and a few other unforeseen factors
such as delay, an accident, etc. Therefore, the actual travel time
in sunshine hours of all trains considered in this study is cal-
culated using the actual departure and arrival times according
to the official IR record for the year 2019 [16]. This study not
only provides an opportunity to use the large roof areas of train
coaches to harvest green power and explore the opportunity to
reduce diesel consumption and carbon savings, but also high-
lights several financing options referring to similar international
best practices.
In line with this, several existing financial strategies for RE pro-
jects around the world are also studied to illustrate the gaps that
need to be addressed to pool effective funding for RE projects.
Typically, RE projects require a substantial initial capital invest-
ment, in addition to their overall lifetime expenses. Given that
all financing terms remain consistent in renewable-energy ven-
tures, investors with limited spontaneous investment capacity
are discouraged from participating in the RE sector [17]. Various
existing literature [18, 19] also found that the huge initial cost
directly affects the profitability of at least the first few financial
years and affects the bankability of the RE project. RE projects
typically have two main required components. The first is to get
financing at a cheaper rate and the second is the capital cost.
Normally, the RE is financed through a mixture of debt and equity.
Unlike European countries and the USA, the cost of debt is higher
in India, as the bond yield is much higher. This leaves only two
options for favourable RE funding in India: increase debt tenure
[20] or invest more in equity injection (≥30–40%) if sufficient debt
funding is not available [21]. Unfortunately, due to the relative
immaturity of proper financial instruments, most Asian countries
are highly dependent upon banks rather than the capital markets.
Cambodia, Lao People’s Democratic Republic and Myanmar are
still in the process of building a proper banking system to finance
RE projects. India and China mainly depend on bank loans [22]
but the bank prefers non-renewable projects due to their track
record, lower capital cost, shorter repayment period and good ROI
[19]. So, the need in the current era is stronger innervation in RE
financing. In the article, the pros and cons of existing financial
tools for RE financing in India are analysed and three innovative
financing mechanisms are proposed to match investment in RE
and investors. Although the recommendations are given mainly
for India, these are equally applicable in any other Asian country.
2 Research methodology and case study
The IR operates 289 185 freight wagons, 74 003 passenger
coaches and 12 147 locomotives according to the 2019 data [16].
Passenger coaches include conventional integral coach factory
(ICF) coaches [23], rail coach factory (RCF) coaches [24] and Linke
Hofmann Busch (LHB) coaches [15]. All these coaches have suf-
ficient rooftop space to accommodate SPV panels and most of
these coaches remain exposed to sunlight throughout the year.
This enables the IR to explore the possibility of operating solar-
powered train coaches across the country to achieve the goal of
the IR Go-Green mission [25]. Integration of SPV on the rooftops
of rail coaches would reduce diesel consumption and produce
consequential carbon savings. Due to the most advanced safety
features, higher running speed, higher passenger capacity and
1071
more comfort, the IR started upgrading conventional ICF and RCF
coaches with LHB coaches throughout the country. Therefore, the
installation of SPV panels on LHB coaches is the primary focus of
this study.
The IR manages its large railway network by subdividing into
seven major operating zones [25], namely the Northern Railway,
the Northeast Frontier Railway, the Western Railway, the Southern
Railway, the South Central Railway, the Eastern Railway (ER) and
the Central Railway. Among the seven major railway zones, ER
is considered a sample to demonstrate the fundamentals of this
research study. However, the main findings of this study can
be generalized and can be extended to any level of the railway
network and geographical areas provided that the main factors
influencing them are well taken care of. The ER has an ~2680-km
railway track that covers major cities such as Howrah, Sealdah,
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Malda, Chittaranjan, Asansol and Kolkata [25]. According to the
2019 official record, 300 express trains ran every week from two
main terminal stations of ER, namely Howrah and Sealdah. Thus,
the details of all these 300 trains are collected from the regional
ER including the schedule, type of coaches and details of the aux-
iliary power system for this research purpose.
2.1 Electrical loads in the ICF and LHB coaches
ICF coaches are self-generating cars; an alternator is coupled
with the moving wheels and axles. Therefore, the power gener-
ated by the alternator is used to supply the auxiliary loads of
that coach. In contrast, the LHB coaches are not self-generating
and so the auxiliary loads of all LHB coaches are supplied by two
diesel generator sets, attached one at each end of the train. This
paper mainly deals with LHB coaches; thus, the auxiliary load
details of LHB coaches are the primary focus here. However, for
a better understanding of the difference between the auxiliary
loads of LHB and ICF coaches, an overview of the auxiliary loads
of ICF coaches is also discussed here. The feasibility of installing
suitable SPV modules on the rooftops of rail coaches was al-
ready reported in [12–15]; however, actual savings on diesel by
employing solar power-assisted auxiliary power supply sys-
tems in train coaches with actual operational data has not yet
been reported in the literature. Calculating the energy required
to drive the load of a coach is important to derive the actual
amount of savings in diesel fuel with the implementation of a
solar-assisted auxiliary power supply system in a train. The fun-
damental motive is to reduce the runtime of diesel generators
that are currently used to provide auxiliary power to all coaches
on a train.
Despite the unequal passenger-carrying capacities of ICF and
LHB coaches, ICF and LHB coaches are typically used for non-AC
(air-conditioned) compartments and AC compartments in the IR
transportation system. In addition, the non-AC compartments
are divided into general coaches, sleeper coaches and chair cars.
These coaches are differentiated according to load types and
seating arrangements. On the other hand, the AC compartments
are differentiated into three types, namely first-class AC, two-tier
AC and three-tier AC. Each category of the coach has its electrical
load demand. Therefore, for simplicity and as a pilot initiative,
auxiliary loads of only non-AC coaches that will be supported
by solar power generated from rooftop SPV panels are the pri-
mary focus here. Two types of non-AC coaches are used in the
IR, namely sleeper coaches and general coaches. Sleepers and
general coaches are very similar in design, only the electrical
loads are slightly different. The amount of savings in fossil fuels
and the reduction in CO2 emissions are estimated in this study
1072 | Clean Energy, 2023, Vol. 7, No. 5

considering that the power generated by the SPV panel can only
supplement the power generated by the diesel generator set. The
complete replacement of the auxiliary power supply system is
not considered here. Details of the electrical loads in each LHB
coach and ICF coach are described in Tables 1 and 2.
According to the official record collected from the ER of the
IR, ~300 express trains (average speed >120 km/h) depart or ar-
rive from Howrah and Sealdah (two major terminal stations
in the ER region) every week. The average number of non-AC
sleeper classes and non-AC general classes in the sample set
of trains are 10 and 4, respectively. Therefore, the total loads
of each train are calculated considering these average num-
bers of coaches as depicted in Tables 1 and 2. It can seen from
Tables 1 and 2 that the total auxiliary loads of both ICF and LHB
coaches are very similar except for the charging point load in
on the roof of coaches is carefully detailed in [13, 14]. The instal-
lation of the SPV panel on the coach roof must comply with the
standard dimensions for the installation of the SPV panel on the
roof declared by the Research Design and Standards Organisation
(RDSO), Ministry of Railways, GoI. RDSO also set a guideline to
restrict the dimension of any moving body on the rails for safety
purposes. The dimension of the moving object must not exceed
the maximum moving dimension as well. Shravanth et al. [5]
presented a detailed understanding of the module-mounting
structure and the SPV panel considering the design constraints
specified by RDSO for the IR [5]. Similar design parameters are
considered here for this study and the possible amount of solar
energy that can be harnessed is explored.
To assess the amount of energy that can be harnessed from the
rooftop SPV system, the actual run hours of all 300 express trains

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LHB coaches and the difference is insignificant. Therefore, fur-
ther calculations are carried out considering the load of LHB
coaches.
2.2 Energy generated from rooftop SPV system
and CO2 mitigation
In India, the average global horizontal irradiance (GHI) is high
throughout the year, with May having the highest GHI of 6.8 kWh/
m2 and the lowest of 4.2 kWh/m2 in December [26]. The entire
rooftop area of a coach is exposed to sunlight; however, the entire
space cannot be used to deploy solar panels. A portion should
be left vacant to provide access for maintenance purposes. The
actual area available for installing SPV panels on the roof of LHB
coaches is well described by Vasisht et al. [14]. Since the coach
roof is curved, SPV panels cannot be installed in a flat position or
at the same inclination. The impact of the SPV panel inclination
of the ER zone are calculated. The scheduled departure time and
arrival time of each train are collected for the official records
for 2019. Then the run hours of each train during the sunshine
hours are calculated. Through extensive analysis, it is noticed
that among the 300 trains that arrive or depart every week from
the major terminal stations of the ER zone, ~195 trains (65% of all
trains) run during maximum sunshine hours. Therefore, among
300 express trains, 195 trains are filtered out for further consid-
eration. A sample of 10 trains among the 195 trains is shown in
Table 3 to demonstrate the methodology used to calculate the
run hours of each train during the sunshine period. To minimize
the effect of seasonal variation of sunshine hours, 8 AM to 4 PM
is considered throughout the year. The scheduled arrival and de-
parture times are considered, which may slightly vary from the
actual travel time due to operational delays. However, the impact
of delays on the travel time of all 195 trains would not be great.
More so, these are unpredictable and vary from year to year, and

Table 1: Load details of LHB sleeper-class and general-class coaches [16]

LHB sleeper coaches LHB general coaches

Types of lights Units Rating (W) Total wattage Types of lights Units Rating (W) Total wattage

LED lights 32 9 288 LED lights 26 9 234

Night lamps 10 4 40 Night lamps 10 4 40
Gangway lights 2 25 50 Gangway big compact fluorescent light (CFL) 2 5 10
Mirror lights 2 8 16 Carriage fan 28 38 1064
Carriage fan 32 38 1216
Charging points 18 110 1980
Total load per coach 3590 Total load per coach 1348
Total of 10 coaches 10 3590 35 900 Total of 4 coaches 4 1348 5392

Table 2: ICF sleeper-class and general-class coach load details [16]

ICF sleeper coaches ICF general coaches

Types of lights Units Rating (W) Total wattage Types of lights Units Rating (W) Total wattage

LED lights 26 9 234 LED lights 28 9 252

Night lamps 10 4 40 Mirror fencing light 1 5 5
Gangway light 2 25 50 Gangway box fitting light 2 25 50
Mirror light 2 8 16 Mirror light 2 8 16
Carriage fan 32 38 1216 Carriage fan 28 38 1064
Total load per coach 1556 Total load per coach 1387
Total of 10 coaches 10 1556 15 560 Total of 4 coaches 4 1387 5548
 Strategic recommendations for financing green and sustainable energy projects | 1073

Table 3: Train travel duration during sunshine hours for 10 sample trains

Train name Timings (24-hour clock) (hh:mm) Average run hours in No round Annual run hours
daylight/round trip hh:mm (h) trips per year in daylight (h)
Onward Return

Santiniketan express 10:10–12:30 13.10–15:40 4:50 (4.8 h) 365 1752

Abhatoofan express 9:35–7:00 (next 21:00–19:30 (next to next day) 30:25 (30.4 h) 365 11 096
to next day)
Howrah New Delhi 8:35–6:25 (next 12:55–10:30 (next day) 14:00 (14 h) 104 1456
special day)
Mithila express 15:45–8:30 10:00–4:00 6:45 (6.75 h) 364 2457
Kanyakumari express 16:10–11:35 (next 7:50–3:20 (next to next day) 27:35 (27.58 h) 104 2868.3
to next day)
Howrah Mumbai Mail 22:00–11:25 (next 21:30–11:45 (next to next day) 23:10 (23.16 h) 364 8430.2
to next day)

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Geetanjali express 13:50–21:20 6:00–12:30 (next day) 22:40 (22.6 h) 364 8226.4
(next day)
Kanchanjungha express 6:35–20:45 (next 5:55–19:25 (next day) 32:00 (32 h) 208 6656
day)
Sealdah New Delhi 21:15–11:55 17:55–10:55 6:50 (6.83 h) 208 1420.64
express
Trivandrum Kochuveli to 23:30–10:40 (next 20:00–3:15 (next to next day) 18:40 (18.6 h) 104 1934.4
Indore Junction express to next day)

are thus very hard to generalize and are not considered in this
study. All 195 trains do not have LHB coaches; however, results
are estimated in this study assuming that all 195 trains have only
LHB coaches.
It can be seen from Table 3 that the annual run hours of each
train during the sunshine period exhibit significant variations.
Consequently, using a fixed run hour for all trains during this
period would result in an inaccurate estimation of annual solar
energy generation from SPV panels. This, in turn, would lead to
an incorrect assessment of the amount of CO2 emissions. Quite
obviously, the derived benefits are likely to differ significantly
from the actual outcome. Therefore, the total annual run hours
of each train for all 195 trains are calculated using the same
methodology shown in Table 3. If the SPV panel had been in-
stalled in all these 195 trains in the ER zone, then the amount of
energy generated from the rooftop SPV system would be close to
the value calculated in Table 4. The average solar energy that can
be harnessed using a solar panel with an area of 1 m2 in India is
154 Wp [14]. The equivalent amount of CO2 emissions that can
be mitigated by reducing diesel consumption is also shown in
Table 4.
that the efficiency of a panel will be only 75% of its nameplate
efficiency after 25 years. All costs are presented in USD, where
the currency exchange rate is considered as 1 USD equal to 70
INR.
The low ROI indicates that the project could yield optimal
returns and therefore can be considered a bankable project
[30]. This type of bankable project can be implemented by
public–private partnerships or attract funding from individual
promoters. For most RE projects, the initial upfront cost is fi-
nanced through debt financing. This type of RE project with lu-
crative ROI in one of the thrust areas such as greening railways
will help in risk mitigation and thereby increase the interest
of domestic institutional investors (DIIs), foreign institutional
investors (FIIs) and green banks. Therefore, an in-depth under-
standing of the limitations of existing financial strategies of
a developing country like India and the framing of highly ef-
fective financial strategies and policy roadmaps are extremely
essential to accumulate a higher number of funding oppor-
tunities for RE projects. The remainder of the article highlights
these aspects in detail.

2.3 Economic analysis 3 Proposed financing mechanisms for RE

The economic analysis of the rooftop SPV systems that can be
installed on all 195 trains in the ER region is carried out based
on the experimental values summarized in Table 4. The cost of
diesel fuel is dynamic, thus an average cost of $1 per litre of
diesel is considered in this paper based on the data from the
Indian oil corporation’s official website, the oil supplier to the IR.
The cost per unit of SPV panels is considered according to the
approved cost scheduled by the Ministry of New and Renewable
Energy Resources of the GoI [29]. The economic analysis is pre-
sented in Table 5. The initial capital investment required to in-
stall the SPV system on each coach includes the cost of SPV
panels, module-mounting structure, control circuits, electrical
cables and balance-of-system (BOS) components. The annual
depreciation of the SPV panel is typically considered as 1% and
the average lifespan of an SPV panel is 25 years, which implies
project funding
An overview of several existing financial strategies for RE pro-
jects around the world is discussed in the introduction and the
‘State of the art’ section of this article. In continuation of that,
a more detailed discussion highlighting the limitations and re-
commendations to address these issues in the Indian context is
presented in this section. A recent report [31] revealed that a sub-
stantial amount of government funding from public sector (PSU)
banks and other financial institutions has previously gone to
coal projects rather than renewables. Moreover, a lion’s share of
the project funds, amounting to almost 70%, has come from the
debt-equity type of funding, whereas only ~30% is from equity
funding. The cost of debt in India is in the range of 24–30%,
which is much higher when compared with the USA and Europe
[32]. While equity funding is mainly provided by the project
1074 | Clean Energy, 2023, Vol. 7, No. 5

Table 4: Summary of projected benefits of rooftop SPV on rail
coach in ER zone
Solar energy that can be harnessed in 1 m2
Area available on the roof of one coach (LHB
coach)
The capacity of the solar plant
proposed on one coach
Considering system efficiency as 80%, the
capacity of the solar plant that can be
installed on one coach
A. Capacity of the solar plant that can be
installed on one train (10 sleepers + 4 general
coaches)
B. Annual run hours of all 195 trains during
the sunshine period
Rural Electrification Corporation and the National Bank for
Agricultural and Rural Development also finance RE sector pro-
154 Wp jects.
Problem identified: Regulatory concerns, such as a delay in
52.8 m2 sanctioning loans due to excessive red tape and slow processing
by government agencies, always prevail for this type of funding.
52.8 × 154 = 8.1 Researchers [33] highlight that the approval of projects is delayed
kWp
by ~66 days on average compared with its normal prescribed time.
6.5 kWp
3.1.2 Clean Energy and Environment Fund
91 kWp This fund supports entrepreneurs and researchers in the RE
sector by collecting taxes on fossil fuels, such as coal. The sole
objective of the fund is to support the development of clean en-
541 674 h ergy. A portion of this fund is also leveraged by the IREDA for RE
projects.

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Annual energy yield from 195 trains (A × B)
Amount of diesel consumed to generate 1
kWh of electricity [27]
Annual diesel savings
Annual reduction in CO2 emissions [28]
49 292 352 kWh Problem identified: The utilization of the fund for the proper
0.25 L cause is a problem so, from the inception in 2011–12, the fund
has not been properly used. Recently, the GoI has used it as a
12 323 088 L Goods and Services Tax compensation fund and for the rejuven-
32 755 t ation of the Ganga River. This evidence indicates that, despite
the fund being intended for RE projects, it is misused for non-RE
projects.

Table 5: The economic analysis of the project

3.1.3 Priority sector loan
The estimated annual yield of the 195 trains (from 49 292 352 As the RE sector has a funding crunch, the Reserve Bank of India
Table 4) kWh
(RBI) categorized this sector as a priority sector in April 2015. The
Annual diesel savings 12 323 088 L RBI decided that 40% of the net credit of banks should be lent
Amount saved on diesel per year ($) (cost $1 per $12 323 088 out to the priority sectors. However, there is a maximum limit
litre) placed on bank loans for RE projects. The maximum loan limit
Price per watt for SPV modules ($) $0.67 has been kept at $2.3 million per borrower (~150 million INR) for
The initial investment for one train ($) including (91 × 1000 RE projects such as solar power generators, biomass-based power
30% for BOS × $0.67) × generators, windmills, micro-hydro plants and for other non-
1.30 = $79 261 conventional energy-based public utilities such as street lighting,
Total investment for 195 trains $15 455 895 village electrification and others [34].
Operational and maintenance (O&M) cost of a $16.61 Problem identified: The current trend shows that the proposal
1-kW solar power plant as per Central Electricity cannot collect estimated finance from the bank to the RE sector.
Regulatory Commission (CERC) guidelines The main reason for that is that RE has been mixed within the
Annual cost of O&M for 195 trains $16.61 × 91 kW large area of ‘energy’, resulting in a large amount of loans going
× into the non-RE sectors because all other sectors of energy other
195 = $294 820
than RE already have a proven track record and steady cash flow.
Total cost considering O&M cost $15 750 715
Return on investment 1.3 years
3.1.4 Green banks
Green banks have developed an efficient mechanism to accel-
erate RE financing globally. The first such initiative in India was
­ evelopers, in India, for renewable investment, equity funding
d
made by the IREDA in May 2016 and it became the first green
is in a very nascent stage because, to date, it is not been able to
bank in India. This idea was developed to utilize limited public
attract DIIs and FIIs for RE projects funding. A brief discussion of
funds to meet the clean energy target of India.
funding for various sources of RE projects in India and the chal-
Problem identified: The main problem with such an initiative
lenges associated with each financing mechanism are discussed
is legal sanctioning from the RBI. Therefore, mobilizing the fund
below.
at a cheaper rate has not been successful in India. This happens
mainly due to the lack of approval and mainstreaming of these
3.1 Existing RE project financing mechanisms kinds of mechanisms in the Indian financial market.
and challenges in India
3.1.1 Funding through the Indian Renewable Energy 3.1.5 Green bond
Development Agency
The theme of green bonds is relatively new in the Indian market
The GoI formed the Indian Renewable Energy Development compared with other mechanisms of RE funding. The IREDA first
Agency (IREDA) as a non-banking financial institution that introduced Green Masala Bonds in April 2017. In 2017, ~70% of the
worked under the Ministry of New and Renewable Energy funding through green bonds was used to finance RE in India [35].
(MNRE) in 1987 to offer financial support to RE projects through Normally banks do not want to fund the RE sector because of the
lucrative loans, counter guarantees, future cash flow security poor creditworthiness of the RE sector, so funding through green
and many more. In addition to the IREDA, various other gov- banks and other non-banking financial companies is a suitable
ernment agencies such as the Power Finance Corporation, the source for RE sector funding.
 Strategic recommendations for financing green and sustainable energy projects |
Problem identified: The success of the green bond market
largely depends on the risk perception of investors. To date, the
green bond yield is not very attractive though it enjoys a sover-
eign guarantee from the GoI. The mechanism is only successful
if an investor understands that their investment is not only for
better profit, but also for the social cause of saving humankind
from global warming.
3.1.6 Infrastructure Debt Fund
The Infrastructure Debt Fund (IDF) was created to accumulate
long-term debt in infrastructure projects. Currently, the IDF
is used to fund public–private partnership projects. It is a very
useful mechanism to refinance ≤10% of their total outstanding
borrowing from infra companies through commercial papers and
short-term bonds [36].
Problem identified: To date, the IDF cannot make any signifi-
cant impact due to the lack of good-quality bankable RE projects
in India. Another problem is the poor yield for IDF funding.
3.1.7 Crowdfunding
Through crowdfunding, many small retail investors can fund a
noble cause. It becomes very effective if the media and other in-
formation resources can be used to attract a public investor for a
common social goal. In North America and western Europe, this
is a very popular tool for attracting finance. In India, recently, slo-
gans such as ‘MeraGao Power’ and ‘Boond Engineering’ were used
to collect funds for RE projects.
Problem identified: An inappropriate regulatory framework
is the main problem here. Mass awareness is required that this
crowdfunding is required to save Mother Earth by reducing green-
house gas emissions through more RE production.
It is worth mentioning that recently the global approach has
been changing towards RE technologies as they become cheaper
than conventional energy. Many banks and financial institutions
want to divest their funds from the non-renewable sector to the
RE sector. Therefore, it is time to make India an attractive invest-
ment opportunity and, by doing so, a strong economy could be
built with sustainable energy choices. Regarding this, lucrative
ROI projects, such as the green transport project illustrated in this
article, will be one of the solutions to convincing banks/financial
institutions about the creditworthiness of the company. The stat-
istics of the funding sources of the RE project in India for the year
2019–20 can be seen in Fig. 1 as reported in [37].
The following section reports three proposed innovative policy
measures to attract more funding for RE projects. Although this
study focused mainly on the Indian context, the recommenda-
tions are very applicable to RE projects in any country in the
world that is fighting to reduce the financial gap in the RE sector
between access to finance and the cost of capital.
3.2 Strategic recommendations for RE project
financing
3.2.1 Increase equity injection in RE through the buy-and-
hold strategy
In India, RE financing is mainly based on loans and bonds. To in-
crease equity funding, the cash reserve and cash outflow are the
two major issues. Here, DIIs can offer a mutual fund in which the
‘buy and hold until maturity’ strategy will be applied to finance
the RE project. The mutual fund will hold an asset throughout
the commissioning period of RE projects and can provide cash
flows; however, by doing so, the fund might have to sacrifice li-
quidity. If the lucrative ROI project as depicted in this paper is
1075
considered for funding through this type of equity mutual fund,
then it might generate more return than other peers after the end
of project commissioning. This type of fund can easily attract the
large pension fund and the life insurance fund in which investors
happily sacrifice liquidity in place of a good return. More invest-
ment through equity funding will reduce the burden of loan re-
payment and companies can invest their money in growing their
business in the RE sector.
3.2.2 Direct tax benefit to the promoter
Though the GoI provides many benefits such as accelerated de-
preciation, generation-based incentives and viability gap funding
to the developer, to date, the reflection of these benefits on the
real-life balance sheet is not very insignificant. As the RE pro-
ject is one of the major thrust areas and connected to the en-
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ergy security of any country, the respective government should
extend direct tax benefits to the promoter who can set up a good
ROI-based project for ≥5 years. Regarding this, Belgium, France,
Canada, Germany and some other countries have already set re-
cords that can be considered as references.
3.2.3 Financing RE projects through real-estate
investment trusts
Real-estate investment trusts (REITs) have the potential to be the
most successful public investment financial mechanism to fund
the renewable sector in India. An investor who wants a steady
cash flow and wants to hedge/allocate assets in a different seg-
ment always prefers REITs. A REIT complies with the defined
asset by the government and it must distribute ≥90% of its annual
taxable income as dividends. REITs cannot go for trade or busi-
ness, whereas, as per the rule, 75% of the income of a REIT should
be earned from real estate and the remaining 25% of the total
income must come from passive sources such as rents, mortgage
loan interest and capital gains on the sale of real-estate assets.
Within the limited scope, 25% of the funds can be used to build
solar rooftop projects in buildings. This will be very effective in
achieving the ambitious target of installing a 40-GW solar roof
project by 2026 [38].
4 Conclusions
Taking into account the importance of energy security and the
integration of RE sources into the transportation system to re-
duce environmental pollution and mitigate climate change,
this study presents a case study on the IR green initiative.
Through a case study of the eastern IR zone, the engineering
design of solar rooftop coaches is depicted to meet the aux-
iliary power consumption of the railways. Real-world data,
including the number of rail coaches, train running schedule,
diesel consumption rate and other relevant information, are
used to estimate the potential diesel savings with an ROI of
1.3 years. Furthermore, a review of the literature reveals that
most Asian countries face challenges in bridging the financial
gap between access to finance and the cost of capital, particu-
larly due to high bond yields and low equity injection in the RE
sector. This lack of financial mechanisms to match investment
and investors is identified. In this context, seven existing pol-
icies in India that aim to collect the required funding for RE
projects are reviewed in detail. These policies include funding
through the IREDA, the National Clean Energy & Environment
Fund (NCEEF), priority sector lending, green banks, green bonds,
infrastructure debt funds and crowdfunding. Each existing
1076 | Clean Energy, 2023, Vol. 7, No. 5
M&A
Bonds Debt
18%
4% 3% Dollar bond
5%
IPO
5%
Equity
Green bonds
24%
Bonds Debt Dollar bond Equity Green bonds IPO
Fig. 1: Sources of RE funding in India for the year 2019–20 [37].
policy/financial instrument is reviewed individually, identifying
its shortcomings in effectively collecting the necessary funding
to achieve India’s ambitious target of commissioning 175 GW
of RE by 2022. One of the identified problems is the bank-
ability of the projects, which is addressed through a detailed
research case study of the eastern zone of the IR, as described.
The calculated ROI ensures the bankability of such projects.
The second problem is the need for robust policy measures to
reduce the dependency on banks and capital market funding
for RE projects. To address this, three robust policy measures
are recommended: increasing equity injection in RE through a
buy-and-hold strategy, providing direct tax benefits to the pro-
moters and financing RE projects through REITs. To increase
equity injection, a proposal is made for DIIs to offer a mutual
fund that follows a ‘buy and hold till maturity’ strategy for
funding RE projects. Although this may reduce liquidity, it is
expected to generate higher returns compared with other peers
after the project commissioning period ends. The study also ob-
serves that various benefits offered by the GoI, such as accel-
erated depreciation, generation-based incentives and viability
gap funding, have not significantly impacted the balance sheet
of the RE business.
Therefore, it is recommended to provide direct tax benefits
to RE promoters, following the example of countries such as
Belgium, France, Canada and Germany. The study also identifies
the potential of REITs as a successful financial mechanism for
retail investment in the renewable sector. REITs are currently
popular in India due to tax-free dividend income up to a cer-
tain limit (~$1400) per year. Within the limited scope, 25% of
the funds can be allocated to building solar rooftop projects
in buildings, effectively contributing to the goal of installing
a 40-GW solar rooftop project by 2026. These three innovative
policy measures are expected to attract more funding for RE
projects. Although the study focuses primarily on the Indian
context, the recommendations apply to bankable RE projects in
any country worldwide that face challenges in bridging the fi-
nancial gap between access to funds and the cost of capital in
the RE sector.
Acknowledgements
This research did not receive any specific grants from funding
agencies in the public, commercial or not-for-profit sectors.
Conflict of interest statement
None declared.
Data Availability
The data underlying this article will be shared on reasonable re-
quest to the corresponding author.
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