ISA will circulate a concept note for the solar bank to all 8 multilateral development banks with which the first treaty-based organisation has signed joint declarations
Mumbai: The International Solar Alliance (ISA) plans to approach multilateral development banks (MDBs) such as Asian Infrastructure Investment Bank (AIIB) to create a special purpose vehicle (SPV) to specifically finance solar projects, said the alliance’s interim director general, Upendra Tripathy.
This SPV aimed at financing $150 billion would become a World Solar Bank, said Tripathi. The concept note for the solar bank will be shortly circulated by ISA to all eight MDBs with which the first treaty-based international government organisation based in India has signed joint declarations.
The idea of a solar alliance was mooted by Prime Minister Narendra Modi during the India-Africa Summit in Delhi in October 2015. ISA has inked joint declarations with the World Bank, African Development Bank, Asian Development Bank, AIIB, New Development Bank, European Investment Bank, European Bank for Reconstruction and Development and the Green Climate Fund (GCF) for enhancing cooperation in the solar energy area.
The proposal for a World Solar Bank comes against the backdrop of ISA’s mission to undertake joint efforts required to reduce the cost of finance and the cost of technology, mobilise more than $1,000 billion of investments needed by 2030 for massive deployment of solar energy, and pave the way for future technologies.
“MDBs have a global duty. All of them can come together and show the way," said Tripathy.
ISA also plans to leverage AIIB’s reach to build a global solar energy ecosystem. According to the contours of the initial plan, five common member countries between ISA and AIIB will be identified for financing more solar projects by the Beijing-headquartered bank. ISA also plans to draw up a two-year play book for training manpower, thereby creating local employment in countries where AIIB has financed solar projects.
China has a 31.02% stake in AIIB, while India, with 8.72% stake, is the second-largest stakeholder.
The first general assembly of ISA will be held in India in October. The marquee event is expected to coincide with the birth anniversary of Mahatma Gandhi and is expected to be attended by representatives of 65 countries, which are signatories to the framework agreement, Mint reported on 18 June.
ISA has also been working on a $300-billion risk mitigation fund as part of a strategy to create a sustainable financing architecture for solar projects worldwide. The fund will be used to insure solar power projects against risks such as default in payment by electricity procurers, foreign exchange fluctuations and regime change. This, in turn, will help attract investors to the space.
“We are in touch with them (AIIB). We are trying to develop a two-year action plan. The first thing that we have requested them is to give us the names of the solar projects that they have financed. We are also requesting them to give us a list of projects in the pipeline," said Tripathi.
Aimed at improving “social and economic outcomes in Asia and beyond", AIIB started operations in January 2016. With 86 countries as members, it has an authorised capital base of $100 billion. Of the $4.39 billion invested by AIIB, India has been the largest recipient, with six Indian projects accounting for $1.21 billion of that funding.
“The idea is that we can tie up with those member countries, where AIIB has sanctioned projects for training of people who will look after these projects…Why projects fail is because there is nobody to take care of them. We are establishing backward linkages," said Tripathi.
“We are trying to identify their member countries and our member countries who are common. Out of those countries, we will select five countries, where AIIB can actually give more projects (financing)," Tripathi said.
India has sought project financing totalling $2.40 billion from the AIIB. The bank will also invest $200 million in the National Investment and Infrastructure Fund (NIIF) of India. Prime Minister Modi will address the opening ceremony of the third annual general meeting on Tuesday in Mumbai.