On Tuesday, President Barack Obama and Prime Minister Narendra Modi of India announced a historic agreement to phase out the powerful greenhouse gases known as F gases and to inaugurate a partnership that will advance solar energy development in India. The agreement between India and the U.S. builds on ambitious pledges made by both nations at the Paris Climate Conference in 2015.
The solar partnership will leverage seed philanthropic investments by a group of U.S. foundations, including the Hewlett Foundation, together with funding from the India government and loans from the U.S. government to attract billions of private investment dollars. This will help catalyze renewable energy growth across India and provide energy access for the first time to millions of people in the country.
Why is this solar partnership unique and innovative, and how would it help reduce poverty in India? Matt Baker, a program officer who leads the Hewlett Foundation’s global climate funding strategy, explains.
Why are the U.S. and India partnering this way?
The world’s efforts to mitigate climate change have made considerable progress in the past two years. In particular, commitments made by the U.S. and India at the Paris Climate Conference could represent a turning point for both countries.
In order for India to meet its goals, which include generating 100 gigawatts of new solar power by 2022, it needs quickly to create a robust market for renewable energy investments and growth. This squares nicely with its development goals of delivering low-cost energy to the 300 million people in India who currently lack access to electricity. As India is endowed with vast solar energy potential, clean, affordable, abundant solar energy – off-grid, micro-grid, and rooftop solar — is the best way for India to reach its goals.
How does the initiative work?
The Hewlett Foundation, the David and Lucile Packard Foundation, the Jeremy & Hannelore Grantham Environmental Trust, and the John D. and Catherine T. MacArthur Foundation are putting up the first $30 million to fund two innovative public-private initiatives in India, which will then be matched by the government of India.
The first initiative will award grants to clean energy business projects to help get them finance-ready. Specifically, it will give energy access solar developers the resources they need to make their projects “finance ready.” This funding will pay for the business activities — feasibility studies, project finance documentation, land surveys, customer due diligence procedures, and so on — needed to meet the loan requirements of the Overseas Private Investment Corporation (OPIC), a U.S. government loan agency that works in developing nations.
The U.S. government set up a similar initiative in Africa via the United States-Africa Clean Energy Finance Initiative (ACEF), which has deployed $20 million in grants to catalyze over $1 billion in clean energy project investments in Africa. We think our funding in India could do even better, leveraging as much as $400 million in investments from OPIC and other investors to generate projects that will deliver solar energy for the first time to communities without any power.
The second project will do something similar, but in the domain of financing projects like those developed under the first one. Philanthropic funding will help catalyze funding for solar energy projects from development finance companies like OPIC, the UK Department for International Development (DFID), the German Investment Corporation (DEG), the World Bank, the Asian Development Bank, Netherlands Development Finance Company (FMO), and others.
This, in turn, will make it much easier for private capital to flow in. The foundation funding essentially acts as insurance against unexpected setbacks for the solar projects. It helps mitigate risk sufficiently to bolster the confidence of the global investment community. We think this can mobilize up to $1 billion in capital flows to Indian solar projects, in particular those that serve the poor in areas currently without electricity.
The two projects thus work in complementary ways to ripen Indian solar projects for billions of dollars of private sector investments, which of course will have the effect of multiplying the impact these projects can have towards protecting our natural environment.
What will this initiative do for people in India?
Good question! It’s too easy, when talking about billions of dollars, government agreements, and lofty finance projects, to lose sight of what this means for everyday people.
More than 300 million people in India – that’s a quarter of the Indian population, mostly rural poor — cannot turn on a light. What power they have for their homes and kitchens comes from kerosene, wood, coal, and cow manure. This takes a huge toll on people’s health, not to mention on the nation’s economy and air quality. Solar energy can deliver power without harming the air or the global climate — and with power, people’s quality of life and economic opportunities improve dramatically.
This initiative will get people in Indian states like Utter Pradesh or Bihar, and many others, rooftop solar for their homes and solar installations that can power whole villages. For the first time, a child will be able to read at night, medicine can be stored in local villages, a kid with an idea can more easily start a business, and small business owners and entrepreneurs can save time they need to focus on their work. And meanwhile, the use of solar energy instead of fossil fuels will help mitigate global warming and contribute to protecting lives all around the globe.
Over the last four years at Hewlett, I have had the privilege of working with a number of solar nonprofits doing pioneering work to deliver clean, affordable solar energy to people without power across India — incredible organizations like the Selco Foundation, the Clean Coalition, and the Shakti Foundation. Our partner Harish Hande at the Selco Foundation says their mission is to “eradicate poverty and the darkness” with renewable energy. “The poor are not looking for sympathy; they are looking for a partner,” Hande says. My hope is that these projects will give those millions of people in villages across India the partners they are seeking and, in this way, improve millions of lives.
What is philanthropy’s role?
Figuring out how philanthropy can attract private investment dollars into clean energy infrastructure could well be the single most important step we as a foundation can take to achieve our goal of protecting humanity by keeping the global temperature rise below two degrees centigrade.
Getting this right is not only great for India’s economic growth and the people of India who will gain access to affordable, clean power. It’s great for the global economy and for redressing the climate crisis.
I believe this U.S.-India partnership, enabled by our relatively small amount of seed support, shows what can happen when governments and civil sector and private sector organizations team up and work together. And if it works, we may have a model that can be used in other places and other countries. Wouldn’t that be amazing?