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A taskforce set up under the aegis of the International Solar Alliance has recommended the setting up of a ‘guarantee fund’ that would function as a sort of insurance against various risks in developing solar power plants.
The taskforce, comprising India’s Council on Energy, Environment and Water (CEEW), the Confederation of Indian Industry (CII), the Currency Exchange Fund (TCX) and the Terrawatt Initiative Alliance, has said in its report that a guarantee fund with a corpus of $1 billion, can make $15 billion worth of solar projects happen. The fund, which the report names as ‘common risk mitigation mechanism’ (CRMM), would create about 20 GW of solar PV capacity in 20 countries.
“The design of the risk mitigation mechanism is ready, it is now in the phase where countries will extend political and financial support to it,” says Kanika Chawla, Senior Programme Lead, CEEW. The CRMM is expected to be in place in a year from now.
The CRMM will cover all non-project risks, including off-taker risk, foreign exchange risk and political risk. Importantly for developers in India, it will cover both delays and defaults in payments.
“The premise of the CRMM is that the risk premium is lower (than insurance companies’) if multiple risks are aggregated across many countries,” Chawla told BusinessLine , adding that “it is an insurance product that is offered at a global scale, covering multiple risks.”
CRMM is designed to create a global solar market, boosting confidence among the international development community and private and public institutional financiers, to help meet international climate targets in countries with high solar potential, says a press release issued by CEEW.
The $1-billion fund is just a pilot. The $15 billion of solar investments it could make happen is but a small part of the trillion dollar ambition, to be achieved by 2030. But the CRMM is an important step in enabling affordable finance to solar, the release says.
Kewywords: solar fund, solar projects, common risk mitigation mechanism for solar projects, solar PV capacity
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