How Big Dollars Are Catalyzing India’s Small-Scale Solar Market
In order to meet India’s energy access goals, distributed solar has to scale significantly. While there has been growth in this Indian market segment, it has been from a very small level of installations. While the government’s target for distributed solar power deployment is for 40 gigawatts by 2022, only 1.4 gigawatts had been deployed by early this year. That means we need a 100 percent compound annual growth rate between now and 2022 — a blistering pace of development.
Luckily, the distributed solar market in India is ripe for rapid expansion, with falling technology costs and government initiatives that have reduced the levelized cost of electricity to make rooftop solar competitive with not only commercial and industrial tariffs, but also with residential tariffs in many cases. However, it’s also a young industry. Many of the companies are in significant need of early stage funding for project preparation services to help them scale up, de-risk and become investment-ready.
Recognizing this need, the Indian and U.S. governments jointly created — in partnership with the Indian Ministry of New and Renewable Energy, the Indian Renewable Energy and Development Agency (IREDA), the Overseas Private Investment Corporation (OPIC), the William and Flora Hewlett Foundation, the Good Energies Foundation, the John D. and Catherine T. MacArthur Foundation, the David and Lucile Packard Foundation, and the Jeremy and Hannelore Grantham Environmental Trust — a facility that leverages the unique risk attributes of grant dollars to mobilize finance for early stage project preparation for Indian distributed solar power developers, called U.S.-India Clean Energy Finance (USICEF). Climate Policy Initiative serves as the program manager.
USICEF will deploy millions of dollars in early-stage project preparation support, including market estimation, product development and testing, and engineering and legal costs, which will help developers become ready enough to attract commercial investment. USICEF’s support catalyzes long-term debt financing for distributed solar power from OPIC, IREDA and other public sector financial institutions, to in turn drive more investment from private sources.
USICEF is based on the Africa Clean Energy Finance Facility, a similar program that successfully leveraged $1 billion in clean energy investment with as little as $20 million in early-stage grants.
Announced a year ago, USICEF recently became operational. It selected its first round of grant recipients, which in total will receive an estimated $900,000 in project preparation support. They are:
- Argo Solar, which provides custom designed end-to-end solar rooftop power solutions for commercial and industrial organizations in India
- HCT Sun India, a subsidiary of U.S.-based HCT Sun LLC and an early-stage rooftop solar developer in India
- OMC Power, an integrated rural power utility company that brings affordable and reliable power to mobile tower operators, surrounding small businesses and communities through smart mini-grids
- SMG Ventures, which implements rooftop solar projects primarily for commercial and industrial customers in India
- SunFunder, an experienced debt provider for beyond the grid and grid deficit solar projects and companies, which will provide inventory, construction, and structured asset finance loans for solar lighting, home systems, mini-grids and commercial rooftop solar projects in India
USICEF is continuing to accept applications for support from distributed solar power companies through its website.
The question that arises for these young companies and the dozens of others that USICEF will support throughout the life of the program is whether early-stage project preparation can help distributed solar reach scale. By creating a pipeline of projects, USICEF is hoping to answer that question with an emphatic yes — an answer that can drive the investment needed for India to achieve a robust, distributed solar power market and energy access for all.
A version of this blog first appeared on Greentech Media. Gireesh Shrimali serves as India Director at the Climate Policy Initiative. Justin Guay is a program officer at the Packard Foundation.