Interview with Senior Investment Officer, Infrastructure and Natural Resources, IFC
Clean Energy is termed as a booming space in India and is expected to witness more private funding, especially private equity funding in future. According to recent report by Grant Thornton, global cleantech sector is forecast to double in size from $188 billion in 2012 to $349 billion in 2020. The International Finance Corporation (IFC), the arm of World Bank, is the largest private investor in Indian clean energy sector and had invested close to $1 billion so far in the space. Soumya Banerjee, Senior Investment Officer, Infrastructure and Natural Resources, IFC, speaks to Reghu Balakrishnan, about IFC’s investment plans in India.
What are IFC’s interests in the clean energy space in India?
IFC is increasingly supporting private sector to move to a lower-carbon growth path—through investments and advisory support in renewable energy, energy efficiency, and resource efficiency, together defined as climate-friendly investments. There has been a ramp up in terms of climate friendly investments in our South Asia portfolio since 2008. In 2008, we invested $58 million in 4 projects and 15 projects for $152 million in 2009. In 2010, we increased the number and size to 20 projects for $380 million and invested $165 million in 2011 in 13 projects. In FY12, till now, IFC has made 12 investments with climate change impact totaling approximately $160 million. At the global level, IFC plans to grow its commitment in climate friendly investments from about $1 billion a year in FY10 to $3 billion a year by FY15.
What are your other activities in India?
IFC supports solar, wind, biomass, small hydro, and off-grid generation in India. We have partnered with several financial institutions like Axis Bank, PTC India Financial Services, Tata Cleantech Capital and IDFC to expand the availability of long term credit lines for renewable energy financing and the capability to evaluate climate-friendly projects through advisory support. We are working on a public-private partnership deal with the state of Gujarat, to design and structure a distributed rooftop solar power project in the state capital of Gandhinagar. The project includes the installation of rooftop solar panels that will generate 5 megawatts of power for over 12,000 households in the city.
Which areas of clean energy will have a great potential in future? Why?
Excluding large hydro, renewable currently account for only a modest 24.5 gigawatts or 12% of total installed capacity. Two thirds of this renewable capacity is still dominated by wind power, but the Government of India’s recent laudable promotion efforts through the solar initiative, the guidelines for biomass projects and the national biofuels blending policy will likely result in a significant increase of solar and biomass projects from present levels in the coming years. That’s where IFC sees an important role for itself in terms of incentivising investors to scale up and replicate these investments.
What are the opportunities in various clean energy models in India?
The strong policy initiatives by the government and strong investor interest in solar power, there appears to be a good possibility of solar power emerging as the next big growth area in years to come, especially in India which has a good solar resource. The growth of solar technologies would depend to a large extent on the rate of decrease in technology costs. Through the current policy initiatives if technology costs can be brought down to a level where solar power comes to parity with other sources of commercial power, it can lead to a rapid growth in this sector.
One of the great benefits of both wind power and solar power (especially solar photovoltaic) is the modular nature of the generating units and the relatively quick installation time and operationally it is quite simple. These factors support rapid growth of this sector. Projects in hydro power are usually complex projects which require careful analysis and a fairly long lead time to develop. Opportunities in this sector are expected to continue at a modest pace.
Which are your funds for clean energy initiatives and allocation for India?
IFC manages a Global Environment Facility funded programme called the Earth Fund that aims to support private sector initiatives to test, develop, and scale up new technologies and business models in climate change and biodiversity through concessional finance and technical assistance. The Earth Fund is a global fund with a total allocation of $40 million, of which $25 million has been committed to date in eight projects around the world.
IFC's Clean Technology Innovation Fund, a $60 million facility, will allow IFC to invest in early stage cleantech companies, including seed investments in higher risk sectors and geographies. IFC will also invest up to $75 million in the $250-million Global Climate Partnership Facility along with KfW, with the focus to make investments in emerging markets including India that will reduce greenhouse gas.
It’s been nearly a year since the founding members of Sequoia India exited to focus on public markets. But Sequoia India has been holding steady and ...