ISA Gets Off the Ground

Mobilising low-cost financing for promoting solar

The International Solar Alliance (ISA) came into effect on December 6, 2017, acquiring the status of an international organisation. It has already been ratified by 19 countries and has 46 signatories to its framework agreement. ISA was initially proposed at the Paris Climate Conference (COP21) in 2015 to create a specialised agency under the United Nations. It aims to promote, disseminate and deploy solar energy.

Until now, the International Energy Agency and the International Renewable Energy Agency has carried on the task of promoting renewables globally. However, there has been no proper framework in place for this. Moreover, there has been a gap between the availability of solar technologies and their implementation in resource-rich countries. This could be attributed to the lack of information regarding these technologies, limited opportunities for capacity building, and a paucity of suitable financing options to make solar energy affordable for rural and poor users.

The ISA, which is headquartered in Gurgaon, aims to deploy over 1,000 GW of solar energy and mobilise more than $1,000 billion of low-cost financing for the solar power segment by 2030. It is currently working on a mechanism to provide financial guarantees to project developers to promote investments in the solar segment. This will facilitate and accelerate the large-scale deployment of solar energy in developing countries to meet their soaring energy demand as well as help fight climate change. Unlike other international programmes, the ISA requires no membership fee. Its key objective is to eliminate the long procedures involved in accessing funds and make the process simpler, easier and more affordable.

Key programmes under the ISA

According to Upendra Tripathy, full-time interim director general, ISA, rural electrification is not the same as universal access to electricity. he ISA focuses on empowerment, not only in terms of providing light to everyone, but also ensuring affordable energy,” says Tripathy. To this end, three key programmes have been launched under the alliance and two more will be launched in the future.

Two programmes were launched on April 22, 2016. The first, “Scaling Solar Applications for Agriculture Use”, aims to adopt common procedures for decentralised solar applications for use in agricultural and rural areas. In addition, it will set up a network of research centres to identify need-based technical solutions, set standards and testing procedures, etc. with partnerships between developed and developing member nations. An aggregated price discovery tender will be rolled out for 100,000 solar pumps under the programme. In line with this, the alliance is planning to release a global tender for 500,000 solar pumps for farmers. This will benefit farmers by providing access to irrigation facilities, thereby increasing their income. India plans to set up 100,000 pumps, Bangladesh 50,000 pumps and Uganda 30,000 pumps. Besides, the ISA is planning to introduce solar cookers under the first programme.

The second programme, “Affordable Finance at Scale”, intends to adopt the best practices needed for setting up common credit enhancement mechanisms entailing low costs. In addition, the programme aims to facilitate collaboration with international financial institutions to help de-risk investments and reduce the cost of solar. The third programme, “Scaling Solar Mini Grids”, was launched on May 24, 2017 for large-scale decentralised solar deployment through mini-, micro- and nanogrids. To this end, successful business models will be adopted and suitable investors and financial institutions will be identified.

The three programmes are designed to achieve a set of individual goals. However, there is a common objective of achieving maximum solar penetration through the lowest possible costs. Apart from this, the ISA plans to introduce a scheme where under the presidents of member countries, Parliament chiefs and judiciary chiefs will be asked to have solar-powered offices and residences. This will be beneficial for the solar rooftop programme and increase its visibility. This scheme is likely to be announced during the All India Solar Summit in February 2018.

The ISA also plans to set up 10 centres of excellence in countries with developed infrastructure such as India, China, France, the US, Brazil, South Africa and Australia. The purpose of setting up these centres would be research and development in the solar segment. These would be full-fledged centres for capacity building, testing, certification and standard setting.

Common Risk Mitigation Mechanism

On May 18, 2017, the ISA initiated a study, Common Risk Mitigation Mechanism (CRMM). The CRMM has been designed as a multilateral market platform to fund participating countries through public funds to reduce risks such as political, offtake, foreign exchange, etc. It has been observed that as much as 75 per cent of the cost of solar power is the cost of finance. Therefore, pooling risks across different projects and countries can help provide a single guarantee cover at prices lower than those offered by the existing insurances.

Going forward, the ISA aims to create an insurance fund or risk mitigation fund worth $1 billion with the help of its member nations and the Green Climate Fund. This is likely to be rolled out by December 2018. Further, a 20 GW pilot project will be launched in 2018 to demonstrate the CRMM’s cost-effectiveness in pooling and aggregating capital and mitigating risks at an international level. By 2030, the CRMM could help mobilise $1 trillion of capital and over 1 TW of solar generation capacity in low- and middle-income countries.

Future plans and targets

With the ISA becoming a legal entity, the  key focus area is to make solar power projects bankable. The alliance, along with 50 think tanks, will come up with field-level projects that can be proposed to the banks. This would help break away from the earlier mindset of “no-money in solar power”, as the international community realises that the issue is not the lack of finance but the lack of suitable projects. This objective is expected to be met under the third programme. The ISA also aims to gather private sector players and create a directory of suppliers for implementing minigrid projects. Tripathy is optimistic that the price of solar equipment will come down and, with the support of the member nations, the target of arranging $1 billion of funds under the CRMM platform will be achieved.

On the upcoming ISA programmes, Tripathy says, “The other two programmes have not been implemented yet. However, storage and e-mobility are areas that can be of great importance.” Moreover, there is a consensus in the solar industry that the successful implementation of large-scale rooftop projects in the commercial and industrial sectors can be a defining strategy for ISA. In the next six months, the alliance is planning to create a common platform to share innovative business models for rooftop solar power projects in different countries and introduce the same before the national focal points and the ministers of 121 member countries. Going forward, ISA, with the assistance of think tanks, member nations and partner countries, plans to put forward an agenda to achieve its overall goals.

GET ACCESS TO OUR ARTICLES

Enter your email address