On December 22, 2016, the Global Green Growth Institute (GGGI) organized a workshop in New Delhi, India on the ‘Access to Clean Energy (ACE) Facility’, a finance facility specifically designed to address the debt financing needs of the off-grid energy (OGE) sector in India.
The objective of the workshop was to hold consultations with relevant stakeholders on the structure and operational design of the proposed finance facility so that it addresses financing needs and market gaps. The workshop was attended by key officials from the Ministry of New and Renewable Energy (MNRE), the Indian Renewable Energy Development Authority (IREDA), and the National Bank for Agriculture and Rural Development (NABARD) – a Green Climate Fund (GCF) accredited entity who reaffirmed the need for such a facility. The workshop also brought together representatives from financial institutions and OGE companies to discuss issues related to the availability and serviceability of commercial debt.
The establishment of the ACE facility will address financing barriers faced by OGE companies and promote renewable energy projects that enable energy for un-electrified and underserved households. The facility will use a combination of a first loss pool to cover risks and a revolving credit facility to catalyze lending from Indian banks and Non-Banking Financial Companies (NBFCs) to the OGE sector, in addition to technical support for lending to the sector.
cKinetics, a boutique consulting firm, has been engaged by GGGI to carry out a market assessment for the facility. They presented evidence-based analysis elaborating upon the rationale and significance of the proposed facility. Representatives from financial institutions and OGE companies shared their practical experiences and deliberated on various aspects of the facility, such as the potential for credit enhancement, serviceable interest rates, required tenor, etc.
During the workshiop, Mr. Siddharthan Balasubramania, GGGI’s Country Representative in India, introduced GGGI’s role in providing technical assistance to MNRE and IREDA to structure a financing solution for India’s OGE sector. Additionally, GGGI is developing projects that can leverage climate finance resources from GCF.
Dr P. C. Maithani, Director, MNRE, emphasized the Ministry’s commitment towards efforts to meet the challenge of universal electrification. He highlighted the role of the OGE sector in addressing this gap, and the urgent need to provide financing through appropriate instruments to enable sectoral growth.
Financing is a major barrier to the expansion of India’s OGE market. While there are several OGE companies operating in the Indian market, very few have been able to scale up operations, primarily due to challenges such as high upfront costs, high operating capital requirements, lack of sectoral performance data, small revenue ticket sizes, and irregular payment cycles. In this context, GGGI is supporting MNRE in structuring the finance facility to provide a combination of technical and financial support to financial institutions operating in the Indian OGE. The workshop was a crucial step towards developing a proposal for GCF financing.