The International Solar Alliance, launched by Prime Minister Narendra Modi and French President Francoise Hollande in November 2015, will channel $300 billion in 10 years to promote renewable energy projects under a global mega fund for clean energy.
The ISA was instituted to connect nearly 121 solar-resource-rich nations for research, low-cost financing and rapid deployment of clean energy.
However, any progress in the ISA can come about only after it attains the status of a legal body under international law. For this, 15 countries need to ratify the framework agreement, making the ISA an inter-governmental body registered under the UN charter.
“France and India have ratified the alliance. Now, 13 more countries have to ratify it. Both governments are working towards achieving that magic number. The treaty will come into force a month after that,” ISA Interim Director-General Upendra Tripathy told BusinessLine.
As a legal body, the ISA will be able to spend funds. As the host country, India has promised ₹100 crore for setting up the ISA secretariat. This corpus will be parked in a bank and will yield around 7 per cent interest annually.
“We are in touch with the Green Climate Fund and the World Bank to create a global mega fund where financial instruments can be taken up,” Tripathy said, adding that there would be no need for countries to write a cheque or deposit currency to this fund, which will be administered by the World Bank.
Tripathy said, “The World Bank only has to mobilise a commitment for $30 billion per year over 10 years. This fund will act as a credit guarantee mechanism for different countries and projects to assure loans of up to $300 billion from the private sector.”
The payment guarantee from the World Bank-mobilised fund can be used for credit enchantment or hedging to lower foreign exchange risk, among others. According to the declaration, when the ISA was launched, one of the commitments was to mobilise $1 trillion of investments that are needed by 2030 to deploy affordable solar energy.“A third of this amount will come from the World Bank-administered fund and another third can come from a notional commitment from the Green Climate Fund. The rest can come from the overseas development assistance budget of ISA members,” Tripathy said.
The ISA is looking to boost the corpus through contributions from corporate institutions. “We are planning to bring out a scheme to seek contribution from Fortune 1000 companies that can contribute $1 million each. This will go to the corpus and will yield an interest of around 8 per cent interest per annum.
“The corpus will never be spent and acts as a permanent endowment to the ISA. All that can be spent is the interest on the corpus,” Tripathy said.
This will be similar to initial contributions by the Indian Renewable Energy Development Agency and the Solar Energy Corporation of India to the ISA.