New Delhi: International Solar Alliance, the India-headquartered grouping of 121 nations for promotion of solar energy use, is planning to introduce an insurance mechanism aimed at mitigating the risks associated with investment and cut down cost of finance for solar power projects.
“A concept document is being developed on the lines of a Common Risk Mitigating Mechanism (CRMM) scheme to create common guarantee funds and develop guarantee instruments with clear scope, delimitation of risk coverage and recourse options as well as to reduce transaction costs to mobilize the investment volumes necessary for scaling up solar projects,” ISA said in a statement issued today.
The Gurugram, Haryana-based body added that the aim is to attract investment of more than $1,000 billion into solar power generation assets in the countries located fully or partially between the tropics by 2030. “We hope to form an insurance mechanism for solar sector for all the 121 countries. Many companies in the sector have apprehensions on investing due to Power Purchase Agreements (PPAs) being delayed or are worried about solar panels failing after a few years,” said Upendra Tripathi, Interim Director General of ISA.
He added that the insurance mechanism will allow the developers to invest and if they face any risk, they will be offered an assurance to pay about 25 percent of the loan if PPAs are not signed. “The idea is to give a commitment,” Tripathy, a former secretary of the renewable energy ministry, said. The ISA also announced its plan to set up a $300 billion Global Solar Fund over ten years with contributions from the World Bank, Official Development Assistance (ODA) and Green Climate Fund to leverage investment from the corporate sector.
The ISA was initially proposed by Prime Minister Narendra Modi and launched at the India Africa Summit ahead of the United Nations Climate Change Conference in Paris in November 2015. India has committed to host ISA Secretariat for five years between 2016 and 2021. It will also contribute $27 million to the ISA for creating corpus, building infrastructure and recurring expenditure.
“The ISA in not a legal body yet. We need ratification from 15 countries and till now only three have signed. But we aim to get the 12 countries on board within a few months,” Tripathy said. The ISA statement said both Indian Renewable Energy Development Agency Limited (IREDA) and Solar Energy Corporation of India Ltd (SECI) have committed $ 1 million each for financing of the alliance’ activities.