IEA: India needs diverse investments in renewables

India aims to triple its renewable power capacity by 2022 to 175 gigawatts by drawing on new solar and wind energy sources.

"India's power system is already adapting to the flexibility challenge," Michael Waldron, an energy investment analyst, wrote in a commentary for the International Energy Agency. "Still, significant new investment in the grid, greater regional integration and market design that rewards flexibility from more efficient thermal generation and hydropower will be important for a more robust system with a high level of solar and wind."

India's economy is among the fastest growing in the world, getting support from lower crude oil prices. The International Monetary Fund expects short-term pressures from a slump in business activity, though growth could expand to more than 7 percent next year.

In February, Paul Cashin, the IMF mission chief for India, said the business climate, however, was an issue for India.

"A key concern for us is the health of the banking system, which is still dealing with a large amount of bad loans, and also heightened corporate vulnerabilities in several key sectors of the economy," he said.

For the IEA, one of the policy priorities for India should be drawing diverse sources of capital to renewables and other low-carbon energy resources.

"Providing incentives to invest in renewables and flexibility over time will be important to meet the country's energy strategy goals," Waldron wrote.

Though coal is still a dominant energy form in India, and parts of the country still lack a reliable source of electricity, the IEA lists India as No. 4 in the world in terms of new solar power and No. 4 in the world based on cumulative wind power capacity.