Finance Instruments for Indian Solar Growth

• India Innovation Lab for Green Finance has launched three investment vehicles to promote renewable energy growth
• Rooftop Solar Private Financing Facility plans to add around 168 MW of rooftop PV capacity in the pilot phase of 2017-2019, and around 500 MW by 2022
• Loans4SME believes it has the potential to finance 800 MW of India's 40 GW rooftop capacity target by 2022
• FX Hedging Facility aims to bring in foreign investment by creating a currency hedge for foreign exchange swap
• The India Lab is backed by Shakti Sustainable Energy Foundation, the UK government, David and Lucile Packard Foundation, and the Oak Foundation to drive more investment for green growth in India

A public-private initiative to drive more investment for green growth in India, the India Innovation Lab for Green Finance (India Lab), has endorsed three investment vehicles – a Rooftop Solar Private Financing Facility, Loans4SME program and a FX Hedging Facility.

The three projects were selected by the India Lab in its 2015-16 'cycle for their innovative ideas', and then refined and developed over a period of a year. Now, these will move forward for piloting in India with the support of its members.

India Lab's secretariat is housed at the Climate Policy Initiative (CPI) in New Delhi. Gireesh Shrimali of CPI, said, "Our analysis for the India Lab has demonstrated that these three green finance instruments can overcome investment barriers and better meet the needs of investors interested in opportunities in clean energy and green growth in India. Together, these pilots can drive millions in new investment."

Here's a brief about the three investment vehicles selected by the India Lab for their 2015-16 cycle:

• Rooftop Solar Private Sector Financing bundles several small projects into one structured investment, which will attract investors who think of it as having sufficient credit quality. It plans to add around 168 MW of rooftop PV capacity in the pilot phase of 2017-2019, and around 500 MW by 2022. The facility is targeted to bring in additional $500 million capital to the rooftop solar sector, reduce the cost of debt by 0.5-3% and create additional 20,000 jobs between 2017-2022.
• The second vehicle, Loans4SME, is a peer to peer lending program to help small and medium enterprises (SMEs) in renewable energy and energy efficiency segment of India to raise debt finance. It starts on
  the premise that around 40% of the 40 GW of installed rooftop solar capacity target of India by 2022 could be driven by the SME sector. This would be about 16 GW by 2022. Loans4SME has the potential to finance 800 MW of this capacity with the total potential for debt financing of $2.2 billion.
• The third vehicle endorsed by the India Lab is the so-called FX Hedging Facility. It focuses on utility scale, distributed and off-grid renewable energy. Its business idea is to provide a cheaper currency hedging solution in India to facilitate large-scale foreign investment into renewable energy. Domestic investment alone would not be sufficient to achieve India's 175 GW of renewable energy target by 2022. Foreign investment thus is an important tool, but it needs a currency hedge for foreign exchange swap to protect against devaluation.

More details about the three investment vehicles are available on the India Lab website.

The India Lab has also invited more ideas for innovative green finance instruments for its 2016-17 cycle. The last date for idea submission is December 23, 2016, and can be submitted at www.climatefinanceideas.org.

The India Lab is backed by Shakti Sustainable Energy Foundation, the UK government, David and Lucile Packard Foundation, and the Oak Foundation. Its main job is to identify, develop and accelerate 'innovative solutions to drive more investment for green growth in India'.

It was set up in November 2015 and is a sister entity of the Global Innovation Lab for Climate Finance. Some prominent members of India Lab are the Ministry of New and Renewable Energy (MNRE), the Ministry of Finance, the Indian Renewable Energy Development Agency (IREDA), the Asian Development Bank, ReNew Power, the World Bank, as well as development agencies of the UK, US and France, among others.