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CEFIM Roadmap Overview - offshore wind and green hydrogen under the Clean Energy Finance and Investment Roadmap for India, OECD & NRDC

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Wednesday, 11th May 2022 | 11 am – 6 pm (IST)
for the 2nd workshop on offshore wind & green hydrogen under the
Clean Energ...

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

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3
Workshop II
Today’s discussions will:
• follow Chatham House rules (followed by workshop summary for feedback)
• recap k...

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CEFIM Roadmap Overview - offshore wind and green hydrogen under the Clean Energy Finance and Investment Roadmap for India, OECD & NRDC

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

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

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CEFIM Roadmap Overview - offshore wind and green hydrogen under the Clean Energy Finance and Investment Roadmap for India, OECD & NRDC

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

Editor's Notes

  • Manufacturing large value items like OSW turbines and electrolysers for GH2 in India can bring value addition  by lowering LCOEs in the LT and ensuring stability in supply chain against geo-political issues. 

    Capital markets: We already observe a strong demand from ESG funds and a quick development of sustainability-linked instruments such as green bonds.
  • Mention anything about national targets / National Policy?

    Note did not have a dedicated GH2 workshop, but did take participate in IH2A workshop: CEFIM provided insights on OECD experience related to Multilateral Funding
    The workshop also highlighted opportunities and challenges for early applications in GH2 demand. CEFIM has likewise continued to speak with stakeholders and international partners as part of wider analytical piece developing on decarbonising industry framework

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