World Bank approves $1.5 bn financing for India’s energy transition

New Delhi: World Bank’s board of executive directors has approved $1.5 billion in financing to accelerate India’s development of low-carbon energy.

A statement from the World Bank said that the financing will help India promote low-carbon energy by scaling up renewable energy, developing green hydrogen, and stimulating climate finance for low-carbon energy investments.

The development comes in the backdrop of India’s ambitious energy transition targets. Centre has set a target of achieving 500 GW of installed renewable energy capacity by 2030 and reaching net zero by 2070. Further, recently the Indian government launched the much anticipated incentive schemes for production of green hydrogen worth over ₹17,000 crore.

The statement said that the ‘First Low-Carbon Energy Programmatic Development Policy Operation’, the first in a series of two envisaged operations, will support India in developing green hydrogen. The low-carbon energy is produced by electrolysis of water powered by renewable energy.

World Bank, in its statement, noted that the financing required to implement India’s energy transition is such that public sector funding alone will not be sufficient. Building on recent successes, this operation will help stimulate private financing and other support by addressing viability funding gaps, reducing off-taker risks, boosting grid integration of renewables, and stimulating demand for renewable energy, it said.

“The program will support the successful implementation of the National Green Hydrogen Mission that aims to stimulate $100 billion in private sector investment by 2030,” said Auguste Tano Kouame, World Bank Country Director for India, adding that tThe World Bank remains committed to supporting India’s low-carbon transition by complementing public financing and enabling private sector investments.

The program aims to scale up renewable energy supply thereby reducing costs and improving grid integration. This will help India reach its committed 500 GW of renewable energy capacity by 2030. The government plans to issue bids for 50 GW of renewable energy each year from FY23-24 to FY27-28, which will avoid carbon emissions of 40 million tonne per annum by 2026.

A national carbon market is essential to provide a level playing field between low-carbon energy and fossil fuels. This program will support policies for a national carbon credit trading scheme to launch a national carbon market. In January 2023, India issued its first sovereign green bond. The program will support policy actions for the issuance of $6 billion in sovereign green bonds by 2026.

“This operation is only one piece of the bank’s comprehensive support to energy transition in India. It is aligned with the Government of India’s energy security strategy. The operation is also aligned with the Bank’s Hydrogen for Development (H4D) Partnership launched at CoP27,” said the statement.

The $1.44 billion loan is from the International Bank for Reconstruction and Development (IBRD) and is facilitated by a United Kingdom $1 billion backstop aimed at boosting the World Bank’s climate change financing to India. A $56.57 million credit from the International Development Association (IDA) is from a recommitment of cancelled IDA credit balances.