New Delhi: India is in talks with more than half-a-dozen leading multilateral funding and lending agencies to try and raise at least $3 billion for solar power projects that will help meet its ambitious renewable energy target, cut the oil import bill and bolster the nation’s position at climate change talks later this year.
The National Democratic Alliance (NDA) government is in talks with lenders such as the Asian Development Bank (ADB), the World Bank, Germany-based KfW Bankengruppe, the Japan International Cooperation Agency (Jica) and the Japan Bank for International Cooperation (JBIC).
In addition, the government plans to tap the European Investment Bank (EIB) and France’s Agence Française de Développement (AFD) for raising loans for renewable energy projects.
“We are in discussion with ADB for two loans of $500 million each for solar parks and rooftops respectively. The proposal has gone to the bank. We also plan to raise $500 million each for solar parks and rooftops respectively from the World Bank for which the proposal is with the department of economic affairs (DEA)," said a senior government official, requesting anonymity.
“We also have a plan to raise €1 billion for solar rooftop projects from KfW Bank. We are also talking to Jica and JBIC to raise funds," the official added.
The NDA government has pushed renewable energy to the top of its energy security agenda, seeking to reduce India’s overwhelming dependence on coal-fuelled electricity. An earlier target of installing 20,000 megawatts (MW) of solar energy capacity by 2022 has been raised fivefold to 100,000MW.
Another government official, who too didn’t want to be identified, confirmed that the government was in talks with various multilateral funding agencies such as the ones mentioned above.
KfW is already involved in India’s clean energy sector through its commitment of lending €1 billion for setting green energy transmission corridors. Jica has signed agreements with Indian Renewable Energy Development Agency Ltd and Small Industries Development Bank of India. Also, the US Trade and Development Agency has committed $2 billion for developing green energy projects in India. This commitment is in addition to a $1 billion medium- and long-term guaranteed loan from the Export-Import Bank of the US.
While queries emailed to the spokespersons of India’s ministries of finance and new and renewable energy remained unanswered, a World Bank spokesperson in an emailed response confirmed the development and said: “The ministry, DEA and the World Bank are working closely on this."
“Jica first studies and surveys the project and make information public only after the MoU (memorandum of understanding) has been signed with the government of India," said an external spokesperson for the Japanese government agency in India.
Foreign loans are cheaper than those offered by local banks and financial institutions. However, even though the interest costs of foreign loans are lower, project developers have to hedge their foreign currency exposure.
“A lot of people are ready to borrow," said the first government official cited above.
“EIB is engaged in discussions with the government of India to find suitable projects that are eligible for EIB financing," said an EIB spokesperson in an emailed response.
The government is expecting an investment of $200 billion in green energy projects from companies. The new government has secured pledges from 213 companies to set up renewable energy capacity of 266 gigawatts (GW) over the next five years. While domestic financial institutions have made a commitment to finance renewable energy projects totalling 78GW, firms have been demanding cheaper loans to set up these projects.
“We are examining financial models to give a thrust to renewable energy," said Piyush Goyal, minister for power, coal, and new and renewable energy, at an energy conclave on Friday in New Delhi, while adding that renewables form an important part for India’s energy security priorities.
Green energy has a share of only 12.14%, or 31,692.14MW, in the country’s installed power generation capacity of 261,006.46 MW.
In response to a query about the Indian government being in talks with ADB for two loans of $500 million each for solar parks and solar rooftop projects respectively, a ADB spokesperson in an emailed response said: “ADB has recently approved Clean Energy Finance Investment Program," and added, “Regarding the support to solar parks, ADB’s support (we are talking of sovereign loans here) is indirect—through upgrading the transmission infrastructure for evacuating power produced in the solar parks, for example, ADB has provided a loan to the government of Rajasthan."
The NDA government wants to ensure 24-hour power supply to all households in a chronically power-deficit country. Around 300 million Indians lack access to electricity and per capita electricity consumption in India is one-fourth of the world’s average.
Queries emailed to the spokespersons of KfW Bankengruppe and AFD remained unanswered at the time of going to press. Queries posted on the JBIC website also remained unanswered.
The government’s focus on renewable energy stems from a desire to cut India’s energy import bill of around $150 billion, which is expected to reach $300 billion by 2030. India imports 77% of its energy requirements. In addition, the emphasis on solar and wind power is expected to strengthen the country’s standing at global climate change negotiations that culminate in a summit in Paris in December.
India’s energy-related moves are being watched keenly in the lead-up to the climate change summit. The nation’s massive dependence on coal-fuelled energy makes it the third largest emitter of harmful greenhouse gases after the US and China, but it is yet to agree to binding emission cuts, arguing rich nations must bear the primary responsibility for causing climate change.