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ISA plans to set up World Solar Bank

Twesh Mishra New Delhi | Updated on September 07, 2020 Published on September 07, 2020

Upendra Tripathy, Director-General of International Solar Alliance

Will help finance the needs of member-countries

The International Solar Alliance plans to set up a World Solar Bank to help finance the needs of member-countries. Speaking to BusinessLine, Director-General, International Solar Alliance (ISA), Upendra Tripathy, said that the World Solar Bank will be tailored to the needs of ISA members in the solar space. .Excerpts:

What is the role of ISA and the World Solar Bank when the UN Secretary-General tweets that it is a powerful idea from India?

ISA has one target in the Framework Agreement — to mobilise more than $1,000 billion by 2030, apart from bringing down solar energy cost: from high cost to grid parity, grid parity to kerosene parity, and from kerosene parity to near-zero cost.

This needs a special finance mechanism — the World Solar Bank — tailored to the needs of members in the solar space, including storage and solar vehicle segments. The matter will be taken up at the Assembly of ISA which is the supreme body to take all decisions.

If approved, ISA will anchor the bank in the initial years, negotiate a separate treaty, finalise the headquarters, and provide 30 per cent profit annually that will flow to ISA to meet its expenses in the absence of membership fee.

India is ISA's host country and has contributed $26 million so far . Will the headquarters of the bank be located in India, given the fact that New Development Bank and Asian Infrastructure Investment Bank are both located in China?

These questions will be decided by the Assembly and the International Steering Committee appointed for this purpose will choose the headquarters (HQ) through a competitive process. Per ISA procedures, there can be an open competition or a Swiss challenge to decide the HQ. India is the second-most populous country and may have a rightful claim for the World Solar Bank.

Whichever country gets the HQ, she has to put in 30 per cent of initial equity and offer official premises and other initial expenses for five years, apart from some contributions to ISA for meeting its expenses for the same period. Many provinces in India may compete to have the HQs.

The Standing Committee membership of ISA has been updated recently. The Standing Committee has been reconstituted with the inclusion of the UK as the Vice-President, and the Netherlands as additional member of the Europe and others region. What does this signify?

In our global governance structure, we have India as President of the Assembly and France as Co-President. We also had one Vice-President each from each region Peru from Latin America, Togo from Africa, Tonga from Asia and the Pacific.

The post of the Vice-President of the European region was vacant. Recently, the region met and nominated the UK as the Vice- President. In addition to the regional Vice-Presidents, each region has an additional member in the Standing Committee, that reports to the Assembly — Niger representing Africa, Sri Lanka representing Asia and the Pacific, Venezuela representing the LAC region. The representation for Europe has now been given to the Netherlands. Thus, the governance structure is complete. With the inclusion of the UK and the Netherlands, we hope to mobilise more resources for programs and projects. The Netherlands has already given $5,00,000 to ISA through the World Bank's Energy Sector Management Assistance Program.

What is the current status of the Common Risk Mitigation Mechanism?

We have requested the latest update from the World Bank. This is a credit risk mechanism. The claim arises only when there is a default by the payee. So, there is no need to transfer the amount by WB or Agence Française de Développement (AFD) or Green Climate Fund (GCF).

Some more member countries are in the process of developing their own counterpart mechanisms. Madhya Pradesh had brought in a risk mechanism of the bridge loan system to tackle delayed payments in the Rewa Project. ISA plans to aggregate demand for finance and insurance products to develop an ISA insurance system for various incidental risks. This is the advantage of ISA wherein member countries can come together and facilitate a platform of common demand for products and services, apart from other activities.

What progress has ISA made on tendering solar pumps for member countries?

We finalised a global price discovery tender for 22 member countries. Then we assisted the countries with a pre-feasibility study for each country through KPMG. Following that, technology missions consisting of finance and technical experts were sent to 9 countries, until Covid-19 stopped it.

We have identified 8 business models for these participating countries to choose from. In countries like Senegal, with the help of AFD, the program has moved forward. They may soon finance 4,000 farmers to avail bank finance to buy pumps. The very fact that ISA has been responsible to bring down cost through global bidding, the savings by member countries will be an indirect subsidy. Plus, the countries now use the discovered price as a reference and comparative price for local purchases.

Also read: ‘World Bank-ISA Solar Risk Mitigation Initiative has mobilised $333 m’

 

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Published on September 07, 2020
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