Catalytic financing can scale up clean energy market: Report

Nagpur: With financing continuing to be a serious impediment in achieving the country’s clean energy goals, the latest analysis reveals that ‘catalytic financing’ can give India’s clean energy sector, especially small-scale projects, a major boost. For instance, the rooftop solar capacity has reached only 1200 megawatt till date as against the Centre’s target of 40,000 megawatt by 2022.

Released by the Indian Renewable Energy Development Agency (IREDA) in association with the Natural Resources Defense Council (NRDC) and the Council on Energy, Environment and Water (CEEW), the report ‘Framework for Catalytic Finance for Underserved Clean Energy Markets in India’ presents solutions based on consultations with over 40 finance experts including commercial banks, private equity, impact investment funds, international climate funds and more.

For the country to balance economy and environment and meet 2022 goals, it needs to double the rate of current investment in renewables. While the total investment in clean energy sector was nearly Rs61, 800 crore in 2016, the country needs investments over 1-1.3 lakh crore every year to achieve renewable energy target, the analysis stated.

Domestic banks have already lent a large sum to power sector, with many public-sector ones reporting high levels of non-performing assets (according to a report by Centre for Financial Accountability). Under such circumstances, tapping into emerging financing mechanisms like catalytic public finance can scale up investments, the analysis concludes.

Simply put, catalytic financing means funding coming in from different sources that would act as a stimulant to a bigger project.

While public financial institutions provided about 40% financing for clean energy last year, stakeholders were of the view that apart from direct lending, such institutions should rope in more private investments. “For meeting the challenge of protecting climate and at the same time extending energy access to millions of Indians, new tools like green windows should be implemented,” said Poonam Sandhu, senior finance and management consultant.

The report recommends facilitating ‘multiple green windows option’ and ‘single new green fund’ for financing clean energy. “Green windows are platforms dedicated to developing catalytic finance instruments,” it stated.

Consisting of a team of experts, each window will have access to a pool of low-cost capital to be used for implementing risk mitigation products. “The green window could be set up as a trust or special purpose vehicle. Low-cost risk mitigation products will help private sector banks to offer competitively priced loans to clean energy market,” the report stated.

Under single green fund option, a catalytic finance vehicle can be developed as an independent entity. “Unlike a green window scheme, the centralized fund would be empowered to develop products and strategies for any clean energy sub-sector. Government funding should comprise 50% or less of this fund so that it is not a state-owned entity,” the report added.

KEY FINDINGS

– Rooftop solar capacity has reached only 1200MW as against the centre’s target of 40,000MW by 2022

– Country needs to double the rate of current investment in renewables to meet the goal

– Catalytic financing can scale up investments

Source: timesofindia.indiatimes