The International Solar Alliance (ISA) may launch an insurance mechanism aimed at lowering the risks associated for solar power in December.
“There could be insurance for risks and to bring down the cost of capital,” Upendra Tripathy, Interim Director General of ISA, told BusinessLine . “We are exploring whether this can be announced during RE-INVEST 2017 Summit in New Delhi in December,” he added, saying the proposal is still in the works.
In the long run, Tripathy said that ISA could not only support India's solar imports to other countries where the projects are being implemented, but also developing manufacturing capabilities in those countries to reduce transportation costs.
The ISA was initially proposed by Prime Minister Narendra Modi and launched at the India Africa Summit in November 2015. It has so far received support from around 40 countries, with 15 of them (the minimum number for the body to become legal) ready to ratify the ISA framework agreement in December. The 11 countries which have already done so are Bangladesh, Fiji, France, Guinea, India, Mauritius, Republic of Nauru, Niger, Seychelles, Somalia and Tuvalu.
“With successful ISA ratification, India will get better opportunities for innovation, financing and by improving on its industrial infrastructure, India will control the solar component prices, thus, saving forex outflow and rationalising solar tariff,” Karunesh Chaturvedi, Head, Corporate Affairs, Vikram Solar, told BusinessLine .
Experts and industry players, however, point out that two years after the initiative was launched, it is yet to deliver things on the ground.
“It's great to see India taking a leadership role in solar energy, however, its success will depend on what concrete support it can lend to actual solar projects, and I think it remains to be seen whether that will materialise,” Andrew Hines, Co-founder, CleanMax Solar, told BusinessLine .
Project financingHines suggests that ISA could create opportunities for projects in southwest Asia and Africa with project financing being one of the possibilities for the agency to play a role. “Project financing is especially challenging in a nascent market, and for small rooftop projects, in particular. Institutions like ISA and others could play an important role in facilitating project financing structures to enable such projects to happen,” he adds.
According to Tripathy, ISA has asked Exim Bank of India and export promotion council to scout for solar projects where ISA could participate. In 2015, India had announced a concessional credit line of $10 billion to Africa with at least 15-20 per cent, or up to $1.5-2 billion, to be invested in solar projects under ISA. “Within this, 75 per cent of content has to be Indian, that will promote Make in India and Indian exports,” Tripathy said.
S Prahalathan Iyer, Chief General Manager, Export-Import Bank, says though there is a considerable amount identified for investments under ISA for African countries, there awareness remains a challenge.
“As per the LOC guidelines, there should be a request to India from the borrowing government through our missions in these countries,” he said, adding that this is not happening yet.
One of the reasons, according to Iyer, could be that developing countries have other priorities, be it infrastructure, agriculture or social sector development.
"However, we need to sensitise these countries on the prioritization of meeting the energy demand, the importance of clean energy and the solar potential existing in these countries," Iyer said.