- Indian renewable energy targets are too big to be supported by banking alone
- Innovative financing solutions must be looked at to finance and support renewable energy projects, says report by credit rating agency CRISIL
- Green bonds can help close the gap between renewable energy projects and their financial requirements
- These bonds can help fund the capital expenditure of green projects or refinance existing loans of eligible green projects of the issuer
India may be able to support the funding needs of renewable energy projects in the country with the help of green bonds. A report by credit rating agency CRISIL and The Associated Chambers of Commerce & Industry of India (ASSOCHAM) suggests looking at the huge target of solar and wind power capacities that India is aiming for by 2022, a lot more needs to be done.
According to the government run news agency PTI, the report suggests looking beyond banks as banking alone won’t be able to help achieve India’s 175 GW renewables target by 2022. The government ought to look at other innovative channels for financing for renewable energy projects.
Green bonds are like any other financial bond instruments for which the issuer gets the money and the investors get their interest. A green bond specifically uses the money to invest in green projects including projects being developed used alternative sources of energy.
Green bonds have become the flavour of the season with many companies, including banks looking to finance clean energy projects with new instruments. A private sector bank in India Yes Bank issued green bonds the third time in September 2016 within a period of 18 months.
In August 2016, India’s largest state run utility the National Thermal Power Corporation (NTPC) issued its Green Masala Bonds in London (see NTPC Issues Green Masala Bonds). It raised $300 million through bonds issued in Indian currency, but the interest and payment will be made in dollars. It plans to use this money to finance renewable energy projects like solar and wind.
In Nov. 2015, the Industrial Development Bank of India (IDBI) issued green bonds worth $350 million in dollars. The proceeds were stated to be used for refinancing of clean energy projects assisted by the IDBI. The Export-Import Bank of India issued a similar bond in March 2015.
The Assocham and Crisil report suggests that these green bonds can either fund capital expenditure of green projects as renewable energy projects or refinance existing loans of eligible green projects of the issuer.
The report read, “Given that green bonds would facilitate attracting a category of investors which are environment friendly and demand investments in green/sustainable financial instruments, these could be a good option to part fund the huge investment needs of the renewable energy sector.”
The global green bonds market is expected to grow further as predicted by global ratings agency Moody’s Investor Service. In February, it had stated that the issuance of green bonds could surpass $50 billion in 2016.