Weekly Update | India looking at all options for low cost financing of solar projects in the country

The Indian government clearly understands the impact and importance of low cost finance for the solar sector in the country and has taken up efforts to woo international institutional capital to the sector. Latest step in this direction is a Memorandum of Understanding (MoU) between US-EXIM and IREDA for a financing support of up to USD 1 billion (INR 61 billion) for made-in-America renewable energy goods and services (refer). This MoU is expected to be signed next week at the India-U.S. Technology Summit.

  •  Steps are being taken by the government to enhance access to financing and certification of off-grid technology
  • Multi-pronged approach to attract institutional capital to the solar sector is a welcome step
  • BRIDGE TO INDIA believes that the government should put additional effort towards ensuring more of private sector participation

solar securitzation costs

                 Image source: Theenergycollective.com

Apart from this, the World Bank is already collaborating with the Solar Energy Corporation of India (SECI) for financing an ultra-mega solar project in Madhya Pradesh. The government hopes that due to the low cost of financing and the large scale of the project, there will be little or no need for providing any additional viability gap funding.

 For decentralized generation, the government is seeking a loan of EUR 1 billion (INR 77 billion) from the German development bank, KfW (refer). If approved, this fund might be used for a proposed 1.5 GW rooftop solar plan. The government is still trying to formalize the modalities of this.

 For off-grid projects and rural electrification, the US government has launched the Off-Grid Alliance. This program is expected to enhance access to financing and the certification of off-grid technology. Other similar efforts with regards to off-grid solar are expected to be taken up by the government in the future.

 This multi-pronged approach to attract institutional capital to the sector is a welcome step. However, as these are all work in progress, the impact of these efforts is only expected to start bringing results towards the latter half of 2015.Due to the involvement of developmental capital and sovereign guarantees, some of these proposals lean towards a larger role for public sector. BRIDGE TO INDIA believes that the government should put additional effort towards ensuring that these mechanisms allow as much private sector participation as possible.

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