The three endorsed instruments, which were selected from among a highly competitive pool, and refined and developed over the course of a year, will now move forward for piloting in India with the support of the India Lab’s members. They include a rooftop solar financing facility, a new lending platform for green investments, and a currency exchange instrument.
The India Lab also announced today that a new call for ideas for innovative green finance instruments is now open for the India Lab’s 2016-2017 cycle. The call for ideas is open to everyone and the deadline is December 23, 2016, at www.climatefinanceideas.org.
“The investment vehicles launched by the India Innovation Lab for Green Finance today show significant potential to catalyze investment to India’s renewable energy targets. They offer exciting new investment opportunities to help accelerate clean energy in India” said Santosh Vaidya, IAS, Joint Secretary, Ministry of New and Renewable Energy.
“Driving investment for renewable energy and energy efficiency in India will be crucial in the next several years. These green finance instruments endorsed by the India Lab can go a long way towards that goal”, said Krishan Dhawan, CEO, Shakti Sustainable Energy Foundation and Host of the India Innovation Lab for Green Finance.
“Our analysis for the India Lab has demonstrated that these three green finance instruments can overcome investment barriers and better meet the needs of investors interested in opportunities in clean energy and green growth in India. Together, these pilots can drive millions in new investment” said Dr. Gireesh Shrimali, India Lab Secretariat and Director of Climate Policy Initiative in India.
The new instruments endorsed by the India Lab today are:
The Rooftop Solar Private Sector Financing Facility aims to drive capital at a lower cost of financing for developers of rooftop solar projects, by providing long term debt financing through securitization. It also aims to demonstrate the commercial viability of sustainability-focused, asset-backed securities for the Indian rooftop solar sector. Over 2017-2022, the Facility can mobilize US$320mn of private capital for rooftop solar power. It has the potential to help raise further investment, beyond 2022, by supporting rooftop solar power developers to grow and by demonstrating the commercial viability of the sector.
Loans4SME is a peer-to-peer lending platform that would increase access to debt financing for small and medium enterprises (SMEs) for renewable energy and energy efficiency initiatives, by connecting them directly with lenders. Loans4SME has the potential to mobilize around US$2.2bn in debt financing for SMEs in renewable energy and energy efficiency by 2022, and thereby help in providing access to finance almost 800 MW of rooftop solar projects.
The FX Hedging Facility aims to facilitate large-scale foreign investment into renewable energy in India by providing a cheaper currency hedging solution. Currency risk – the risk of unexpected devaluation when investing in a foreign currency – is the greatest risk facing potential foreign investors in renewable energy. It requires currency hedging, but commercially available currency hedging products can be expensive. The FX Hedging Facility can reduce the cost of currency hedging by around 30% and has the potential to mobilize a minimum of $9 of foreign debt per dollar of donor grant.
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