For Helping India’s Clean Energy Sector
A consultant with Climate Policy Initiative’s India office, Charith Konda supports the India Innovation Lab for Green Finance. He speaks to Sapna Gopal for TerraGreen on why it is the need of the hour.
What are the challenges that the clean energy industry in India faces, with regards to climate finance?
India requires climate finance to the tune of $3 trillion between 2018 and 2030 to achieve the target of reducing emissions intensity of its gross domestic product (GDP) by 33–35 per cent from 2005 levels. This includes investments required in agriculture, energy, infrastructure, and transport—with the clean energy sector alone requiring investments worth $448 billion. However, the clean energy industry in India continues to face financing challenges that limit the availability of finance at competitive rates for longer tenors. These include investment risks related to currency fluctuations—for example, when lending is in USD, but project returns are in INR, the high cost of currency hedging, lack of adequate liquid instruments, low credit ratings of renewable energy (RE) debt instruments, high perceived risk of projects that have limited historical performance data, etc. In addition to financing challenges, the sector also faces several operational challenges, including the need for a smart grid and balancing technologies and high off-taker risk.
While these challenges are formidable and impact the growth of the clean energy sector, the Climate Policy Initiative (CPI) is working with important stakeholders to design public–private interventions to help clean energy projects overcome these risks. These include financial instruments and business models that are developed in the India Innovation Lab for Green Finance and beyond, such as the foreign exchange risk hedging facility to manage currency risk more efficiently and a payment security mechanism to address off-taker risk.
In India, which has huge targets to meet, as far as clean energy is concerned, what is the role of green finance and how can it help?
This story is from the May 2018 edition of TerraGreen.
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This story is from the May 2018 edition of TerraGreen.
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