Clean Energy Finance and Investment (CEFI) Roadmap for India, 2nd workshop on offshore wind and green hydrogen, 11 May 2022

1. Wednesday, 11th May 2022 | 11 am – 6 pm (IST)
for the 2nd workshop on offshore wind & green hydrogen under the
Clean Energy Finance and Investment (CEFI) Roadmap for India
Poonam Sandhu
NRDC
psandhu@nrdc.org
John Dulac
OECD
john.dulac@oecd.org

2. Clean Energy Finance and
Investment Roadmap
Workshop II: Offshore Wind & Green Hydrogen
2
11 May 2022
John Dulac,
OECD
&
Poonam Sandhu,
NRDC

3. 3
Workshop II
Today’s discussions will:
• follow Chatham House rules (followed by workshop summary for feedback)
• recap key considerations and input from stakeholder consultations
• aim to identify solutions to overcome barriers to clean energy finance and investment
• prioritise actions to enable a pipeline of projects in line with 2030 ambitions
• All participants are welcome to share their thoughts by raising hands (in person and online)
• Online participants please change name to “Organisation + Name” (e.g. OECD John Dulac)

4. 4
Agenda
• Welcome address & remarks 11:00-11:15 IST
• CEFI Roadmap 11:15-11:30 IST
• Offshore wind (OSW) and green hydrogen (GH2) updates 11:30-11:45 IST
• FGD I: Investment needs and cost of finance 11:45-13:15 IST
Lunch break
• FGD II: lowering the cost of finance 14:30-15:45 IST
Coffee service
• FGD III: unlocking capital to realise 2030 ambitions 15:45-17:00 IST
• Concluding remarks 17:00-17:15 IST
FGD: Focus Group Discussion

5. • Enabling the energy transition
requires considerable capital for
clean energy
• Targeted use of public, climate
and development finance can
enable a pipeline of bankable &
investor-ready projects
• A roadmap can prioritise actions
to mobilise stakeholders and
crowd-in private capital
5
CEFI Roadmap context
USD 300b+
needed to finance India’s
clean energy targets to 2030
~3x
increase over current
investment levels

6. The Roadmap process is designed to:
• bring together stakeholders through a series of
consultations and three workshops
• assess critical barriers and prioritise solutions to
improve clean energy finance and investment
(Workshop I)
• deliberate financial tools and investment vehicles to
raise capital at suitable scales (Workshop II)
• agree on recommendations & steps forward for
actions to unlock finance and investment over the
next 3-5 years (Workshop III)
6
CEFI Roadmap context

7. Offshore Wind Workshop 1 – key takeaways
• Policy and regulatory clarity on tariff regime, revenue support/stability, and other project
development elements is needed for early pipeline development
• Infrastructure development like ports and transmission capacity is a key consideration to
enable a pipeline of projects to the 30 GW targets and beyond
• Domestic manufacturing and supply chains are critical to lowering the costs of offshore wind
development but will require industry upgradation/expansion
• Cost of finance including issues with access to finance for certain actors (e.g. OEMS and SME
supply chains) as well as the overall cost of debt need to be addressed to make offshore wind
cost competitive
7
Workshop I – key takeaways

8. • OSW and GH2 are “must-go” with expectation projects will become concrete over next 2-3 years
• Entire value chain should be considered with related infrastructure & ecosystems, such as
domestic manufacturing capacities
• Solutions (e.g. offtake contracts, OSW/GH2 mandates, viability gap funding, FX hedging,
insurance products) will impact how stakeholders will assess risks
• First projects may require equity investors ready to bear some risks, while capital markets will
become more important for scaling up and achieve 2030 targets
• OSW & GH2 are capital intensive, so increase in cost of finance strongly affects LCOE/LCOH.
Solutions (e.g. guarantees) can mitigate the risk and lower cost to kick-start the projects.
• International support (e.g. via export credits and development finance) can build upon on-going
technical co-operation, joint ventures & technology collaborations to facilitate market
development.
8
Recap: consultations

9. 9
OSW: impact from cost of finance
Turbines
Installation
Foundations
Electrical
connection
Development
Contingencies
and Others
Typical installed cost breakdown for offshore wind
2.5-4.0
bn USD / GW
Illustrative impact on Levelised Cost of Electricity (LCOE)
-10% -8% -6% -4% -2% 0% 2% 4% 6% 8% 10%
5% in debt/equity ratio
10% change in turbine cost
2% change in capacity factor
1% change in cost of debt
5 year extension of asset lifetime
10% change in total project cost
Impact of parameters variation on LCOE
Source: IRENA (2019)
Illustrative calculation based on 3.0bn USD/MW, 45% capacity factor, 65/35
debt/equity ratio, 10% cost of debt, and debt tenure of 10 years.

10. 10
GH2: impact from cost of finance
Typical installed cost breakdown for 1MW alkaline electrolyser
Source: IRENA (2019)
-15% -10% -5% 0% 5% 10% 15%
5% in debt/equity ratio
5 years extension of asset lifetime
1% change in cost of debt
5% change in capacity factor
10% change in total project cost
10% change in electricity cost
Illustrative impact on Levelised Cost of Hydrogen (LCOH)
Illustrative calculation based on 800 kUSD/MW, 60% capacity factor, 65/35
debt/equity ratio, 10% cost of debt, and debt tenure of 10 years.

11. 11
Role of value chain in cost (GH2)
• Improving electrolyser costs
and low-cost renewable
inputs identified as two key
levers to reduce cost of green
hydrogen production (within
H2 value chain)
• Investment in domestic
manufacturing capacity (e.g.
OEMs and supply chains) is
also needed, where
electrolyser industry is capital
intensive

12. 12
FGD I: Financing needs
i. How much finance is needed and what is the cost breakdown?
• What CAPEX needs: project development to manufacturing/supply chains and infrastructure/logistics?
• How are developers/industry planning to finance these?
• What is the anticipated cost of financing and what would be the impact of lowering this?
ii. What levers affect the financing of offshore wind & green hydrogen?
• How do potential solutions (e.g. the PLI scheme and offtake guarantee) impact projected project costs?
• What other investment concerns (e.g. country/project/credit/Forex risks) influence project costs, and how
much impact do they have on the cost of finance?
• Other key factors influencing cost of finance, and how are developers/industry/investors planning to treat
these?

13. 13
FGD II: Lowering cost of finance
i. What solutions can support domestic lending for offshore wind & green hydrogen?
• How prepared are domestic lenders (e.g. NBFCs) to start financing offshore wind and green
hydrogen development?
• What do they need to start financing these sectors, and what do they perceive as risks (and the
subsequent cost of finance)?
• Are there lessons to be learned from on-shore wind & solar development?
ii. What can increase international finance for offshore wind & green hydrogen in India?
• How are offshore wind and green hydrogen being financed internationally?
• How do international lenders/investors perceive financing & related risks for these sectors?
• What mechanisms/solutions (e.g. for Forex hedging) can help to lower the cost of finance?
• Where/how can international climate/development finance support lower cost of finance for offshore
wind and green hydrogen development?

14. 14
FGD III: Unlocking capital
i. What can unlock access to capital markets for offshore wind & green hydrogen to realise
2030 renewable energy ambition?
• What are the roles of domestic and international capital markets (e.g. through green/sustainability-
linked and Masala bonds, InvITs, etc.) in financing clean energy development?
• What are institutional investors (e.g. pension and insurance funds) and financial institutions looking
for (e.g. in terms of structuring, risk profiles, etc.) and what do they perceive as risks for offshore wind
& green hydrogen development?
• Are there lessons to be learned from other markets and/or solutions that can help to tap into capital
markets (e.g. to lower the cost of finance and/or recycle capital)?

15. Clean Energy Finance and
Investment Roadmap
Workshop II: Offshore Wind & Green Hydrogen
15
11 May 2022
John Dulac,
OECD
&
Poonam Sandhu,
NRDC