India's goal to ramp up its solar and wind energy capacity could get a major boost through two fast-growing financing innovations - green banks and green bonds, a new analysis today said.
The analysis was released by the Indian Renewable Energy Development Agency (IREDA) in partnership with the Council on Energy, Environment and Water (CEEW) and the Natural Resources Defense Council (NRDC).
Noting that the availability of finance has not kept pace with the commitments made by developers, the analysis said that establishing a green bank and accessing green bonds could help overcome this key market barrier.
Green banks are public entities created to work with the private sector to increase investment in clean energy and bring clean energy financing into the mainstream.
They are innovative and new tools that have been successful in the United Kingdom, Australia, Japan, Malaysia and several states in the US, a CEEW statement said.
"India's goal to dramatically ramp up solar and wind energy capacity could get a major boost through two fast-growing financing innovations - green banks and green bonds," the statement said.
India needs as much as Rs 17.5 trillion or approximately USD 264 billion in financing to reach its target of producing 160 gigawatts of power from solar and wind energy by 2022.
The clean energy target is the centerpiece of India's climate pledge announced in the international Paris climate agreement recently signed by more than 170 countries at the United Nations.
Releasing the reports, Power Minister Piyush Goyal said the government is committed to achieving the renewable energy targets and added that more can be done with longer-term and low-cost international financing.
He urged other countries to do their part in taking stronger action on climate change, the minister said, according to the statement.
"Attractive low-cost finance for clean energy projects is crucial for tapping into India's vast clean energy potential and for transforming India into a low-carbon economy," said Arunabha Ghosh, CEEW CEO.
Ghosh said in 2015, India was the fourth largest issuer
of green bonds in the world, raising debt worth USD 1.1 billion, ahead of several major economies such as China, Japan, Norway and the UK.
"Scaling up the market for green bonds could further reduce the cost of capital, stimulate the flow of finance from institutional and retail investors and expand the base of issuers.
"India is also ready to be home to a green bank, which could offer solutions to overcome local financing barriers to clean energy," he said.
The first report by CEEW and NRDC 'Greening India's Financial Market, How Green Bonds Can Drive Clean Energy Deployment' explores how green bonds work and how they are being used to finance projects such as renewable energy deployment or climate adaptation initiatives.
Just three years ago, green bonds financed about USD 11 billion projects worldwide while this year the financing could rise to USD 100 billion. India, meanwhile, has used green bonds to finance only about USD 1.85 billion in clean energy projects to date, the statement said.
The second report by CEEW and NRDC, 'Greening India's Financial Market: Investigating Opportunities for a Green Bank in India' sketches how India might establish itself as a country on the forefront of innovation as part of the International Green Bank Network.
"Smart financing instruments like green banks and green bonds can accelerate the necessary shift to investment in clean energy projects India needs to achieve its goals," said Doug Sims, Director of Strategy and Finance, Center for Market Innovation at NRDC, according to the statement.
