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Fri, Sep

Does India need a dedicated “Solar Bank" to harness true potential of clean energy?

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Given the fact the that Clean energy technology is constantly evolving, the banks and financial institutions have limited understanding of Clean Energy Based asset finance and to harnesses the massive potential of solar energy available in India, the Government may think of creating a “Solar Bank" ( like MUDRA Bank, NABARD, SIDBI, IFCI, PFC etc..), one that is dedicated to promotion of solar energy, provide financial support and accelerate the creation of Green assets. On a conservative estimate it offers USD $1 trillion clean energy opportunity in India in next few decades. #SolarBank #TheManojRawat

Clean energy systems, i.e., renewable energy and energy efficient systems, will play a key role in de-carbonizing the energy sector across the world, reducing greenhouse gas emissions and address the climate change issue. The amount of energy the sun sends towards our planet is 35,000 times (based on certain estimates) more than what we currently produce and consume in this world. Even if a large part is absorbed or radiated back in atmosphere, it leaves a huge multiple to address our energy needs without any "carbon footprints" and there by help address the issue of “Climate Change” which has impacted the lives of billions of human beings.

Tackling climate change and ensuring Sustainable Development has to be made an inclusive, multi-stakeholder process and the active participation of the corporate sector, banks, financial institutions is essential. The issue of sustainable development cannot be addressed by voluntary individual responses rather we need to think about main streaming sustainability and therefore substantially new way of putting in place an implementable framework, which could be adopted by people on mass scale. The central problem for sustainable development is how to balance the resource use and environmental impacts of economic production with the benefits of that production to society.

I. Green Lending and Clean energy programI. Green Lending and Clean energy program
II. Energy efficiency program
III. Natural Resource Management (Water, soil and energy) program
IV. Environment Underwriting Criteria
V. Environmental monitoring framework

The biggest impact banks and financial institutions have on the environment and climate, and on the world, is through the lending decisions they make. The banks may play an active role in low-carbon energy transition in developing countries to increase the scale, and thereby the impact, of the transition.

A large part of main streaming of sustainable energy could be driven through Financial Institutions in a sustainable manner as they have one of the largest outreach as also “Going Green” represents a major opportunity.

Green Lending will become strategic to financial institutions

Solar Power Bank Image 1

The banks and financial institutions need to consider that addressing environmental issues is a matter of strategy and can be evaluated based the actions being taken, and the benefits realized. This could lead to a deeper understanding of the opportunities inherent in financing a greener business, adopting new approaches to risk management, and cost-saving benefits of cutting environmental footprints both inside and outside a bank’s walls. For banks and Financial Institution in India there two focus areas which could be integrated with the National Program to achieve sustainable development

“Solar Power” Bank can help accelerate Green Finance

I. Provide Direct lending and Refinance supportI. Provide Direct lending and Refinance support
II. Creation of Green Capital Pool: There is imminent need to create large Green Capital pool to finance/refinance clean energy, energy efficiency, natural resource conservation, energy efficient logistics, less-polluting and buildings and other green assets.
III. Creation of Credit Guarantee fund for renewable energy schemes.
IV. Dovetail various schemes for solar energy and irrigation system
V. Microfinance can play a major enabling role in developing markets for small low-carbon energy systems and devices
VI. There is a business case for sustainable energy but still public policy needs to regulate and provide incentive for private action to move it from the realm of social responsibility & philanthropy into mainstream business
VII. Innovative financing approaches and new business models can tackle barriers from the grass-roots level

Solar Power Bank may help Develop India as one of largest solar power markets

Solar Power Bank Image 2

India can seize this opportunity to become of the largest solar power markets. The latest estimates on India's solar power potential by the National Institute of Solar Energy in India has determined the country’s solar power potential at about 750 GW, which in terms pf potential is huge and could possibly address the energy demand in very sustainable manner.

The solar power potential has been estimated using the wasteland availability data in every state and jurisdiction of India. The estimate is based on the assumption that only 3% of the total wasteland available in a state is used for development of solar power projects. Besides other renewable energy sources have a potential for 120 GW. This means that India as country has more than 850 GW renewable energy potential. Out of this we have achieved less than 0.5%.

India’s plan to become of the largest solar power markets in the world has received a massive boost as the latest estimates of its solar power potential. The National Institute of Solar Energy in India has determined the country’s solar power potential at about 750 GW. The solar power potential has been estimated using the wasteland availability data in every state and jurisdiction of India. The estimate is based on the assumption that only 3% of the total wasteland available in a state is used for development of solar power projects. Besides other renewable energy sources have a potential for 120 GW. This means that India as country has more than 850 GW renewable energy potential. Out of this we have achieved less than 0.5%. The potential would on a conservative basis translate into more than USD $ 1.2 trillion capital investment or USD $ 800 Billion plus finance opportunity, for banks.

Besides this a country like India has 27 million agriculture pump-sets which can be replaced over a period of 20 years by Solar Powered Pump sets which itself would need USD 100 billion capital investment.

To conclude....

While meeting the sustainability objectives will require standardising the present environmental framework, enacting strong legislation and introduction of new enabling policies, there is need for adopting a holistic and integrated approach to water, energy policy and planning. The steps taken by Indian Government in promoting Renewable energy especially solar and incentivising the micro-irrigation system implementation has created traction and awareness with farmers and people.  However, this transformation of energy system would require substantial investments and increased cash flows through financial institutions, therefore the country may need a “#SolarBank” to finance these assets.

Solar Power Bank Image 3

The low carbon and clean energy asset finance offer multi-billion-dollar business opportunity to Indian financial institutions and banks for lending to a “preferred future” and mainstreaming sustainable development. With prices of solar power closing towards conventional energy, a major thrust on developing world's largest solar energy market may ensure universal energy access for India's poor.

For future that's cleaner, "solar powered" & preferred!

Manoj Rawat | Founder & CEO, ValueFin India |#TheManojRawat

Follow him on LinkedIn for more content.

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