AsianScientist (Apr. 26, 2011) – With around 300 sunny days a year, India’s solar energy potential is among the best in the world.
Companies have been slow to tap that potential, however, because of the high up-front costs of solar plants and a lack of affordable long-term financing from banks.
This will soon change as solar energy in India will now get a US$150 million boost with help from the Asian Development Bank (ADB).
ADB’s partial guarantees on loans of up to 15 years will support projects of up to 25 megawatts and support the Government of India’s push to diversify its energy mix away from a heavy reliance on fossil fuels towards lower-carbon, renewable sources.
The guarantees will be available to both local and foreign commercial banks that finance private sector solar power plants in the country and will cover 50 percent of the payment default risk on bank loans made to project developers.
“Solar energy is ideally suited to India because it has available land with strong sunlight. Solar plants are easy to install, even in remote communities that currently have no other access to energy, suit small-scale demand, and are relatively cheap to operate and maintain,” said Philip Erquiaga, Director General of ADB’s Private Sector Operations Department. “In a world of depleting fossil fuels, solar energy is a long-term, sustainable solution to India’s energy needs and security.”
ADB is also separately considering direct finance for larger solar power projects with the private sector in India.
Last year, the Government of India established the Jawaharlal Nehru National Solar Mission under which it intends to commission 20,000 megawatts in grid-connected solar power by 2022 to help fill persistent energy shortages in the country.
The first step will be to build smaller plants that can ultimately be scaled up.
Alongside the guarantees, ADB is also providing $1.25 million to provide training on solar technology and risk issues and assist participating banks to carry out technical due diligence on individual solar projects.
A separate grant of $500,000 will be provided from ADB’s concessional Technical Assistance Special Fund, with the other $750,000 grant coming from the Government of Japan-established Asian Clean Energy Fund. This fund is part of the ADB-administered Clean Energy Financing Partnership Facility.
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Source: Asian Development Bank.
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