State-run Indian Renewable Energy Development Agency (IREDA) might be converted into a Green Bank to enable it to access funding from overseas banks, a top official said today.
IREDA might be converted in to Green Bank without under going any altercation in its basic structure to enable it access funding from overseas banks that are currently not supporting the solar and wind funding, barring well-known KFW, IREDA CMD S K Popli said at an event here.
“With IREDA conversion into Green Bank, it would be entitled to avail of certain benefits, which the agency is currently deprived of and the proposal is being well supported by the Union Power Ministry,” Popli was quoted as saying in a statement.
Large banks in India are perhaps reluctant to fund the solar and wind projects though no developer in these two segments have defaulted on re-payment though might have delayed the pay off schedule, he added.
A green bank provides low-cost financing support to clean and low-carbon projects.
Meanwhile, a study by IREDA, Council on Energy, Environment and Water (CEEW), and Natural Resources Defense Council said that India’s goal to ramp up solar and wind energy capacity could get a major boost through two fast-growing financing innovations — green banks and green bonds.
“As India surges ahead with its RE plan, the availability of finance has not kept pace with the commitments made by developers. Establishing a green bank and accessing green bonds, the reports show, could help overcome this key market barrier,” the study said.
It said that India needs as much as USD 264 billion in financing to reach its target of producing 160 gigawatts of power from solar and wind energy by 2022.
The clean energy target is the centrepiece of India’s climate pledge announced in the international Paris climate agreement recently signed by more than 170 countries at the United Nations.
According to the report, just three years ago, green bonds financed about USD 11 billion projects worldwide. This year the financing could rise to USD 100 billion. India, meanwhile, has used green bonds to finance only about USD 1.85 billion in clean energy projects to date.
A green bank could offer lower interest charges than traditional banks and tap into international capital to finance solar and wind projects to help India power its cities and rural communities.
IREDA, an arm of the Indian government, currently appears to be the closest institutionally to a green bank, the report notes. Yet, opportunities for state level banks also appear promising.
Green banks are public entities created to work with the private sector to increase investment in clean energy and bring clean energy financing into the mainstream. They are innovative and new tools that have been successful in the United Kingdom, Australia, Japan, Malaysia and several US. states.