India, US to forge $1-bn renewable energy pact

Sources say the deal would be through two 'innovative investment mechanisms' aimed at off-grid solar projects and rural electrification

Washington and New Delhi are likely to sign a $1-billion partnership for the Indian renewable energy sector, paving the way for an investment boost from several US and global investment agencies. Sources close to the development said the deal would be through two “innovative investment mechanisms” aimed at off-grid solar projects and rural electrification.

The two initiatives for solar power are the US-India Clean Energy Finance (ICEF) and the US-India Catalytic Solar Finance Program (ICSFP). ICEF would raise close to $20 million from various US agencies in partnership with the Indian government, during the initial phase. The initiative would be financially supported by the Overseas Private Investment Corporation (OPIC), the US government’s development finance institution.    

Sources said through OPIC’s participation, the Indian solar programme can look at leveraging close to $400 million.

The investments would come from several US agencies and would be used mostly for off-grid solar projects, mini-grids for rural areas and other subsidy-based projects for economically backward regions. For the ambitious rooftop solar programme under the National Solar Mission, ICSFP would pump in around $40 million.

The initiatives aim to generate capital of $1 billion by routing investments from several US and Indian agencies to the solar programme. Indian officials said this was not a grant but innovative financing to bring down the cost of solar power.

“Through these two partnerships, we will explore several possible financing mechanisms which would generate healthy capital flows.     

This is not a one-time funding programme. It’s an alliance to boost investment in the sector,” said an official.   

The government had increased the solar power capacity addition targets by five times to 100,000 Mw by 2022. Of this, 60,000 Mw would be through grid-connected projects and 40,000 Mw through rooftop and off-grid solar projects. The current solar power capacity was 6,997 Mw. The total installed capacity of the country is about to reach 300,000 Mw but around 20 million households still lack access to power.

Fillip for renewable energy

* India-US likely to sign $1 billion partnership for renewable energy sector

* To pave way for financing mechanisms for off-grid and rural electrification projects

* Both US and Indian investment agencies to forge alliance for channelizing investment in the green energy sector

* OPIC to support financially along with global investors