Solar Power in India: ADBs Guarantee Facility and Technical Assistance Program

Don Purka Principal Investment Specialist Private Sector Operations Department March 2012

Background on the Opportunity

Persistent energy deficits across India, heavy dependence on coal-fired power, inability to sustain affordable supply of coal, of course environmental concerns on GHGs the need to harness all renewable sources of energy in India Government of Indias National Solar Mission (NSM) allocated over 1,000 MW of solar PV and concentrating solar power to the private sector 150 MW of PV and 500 MW of CSP allocated in Dec 2010; an additional 350 MW allocated in Dec 2011. In addition, several states (Gujarat, Maharashtra, Karnataka) are directly contracting with solar power developers under their own states solar policy These programs generate a large number of relatively small solar projects in the range of 2-20 MW (project costs of $6 - 60 million) 180 MW of grid-connected solar commissioned in India (Jan 2012)

ADBs Participation and Role

ADB provided technical assistance to MNRE on the NSM, the PPA structure and eligibility criteria (2009-2011) public and private sector collaboration ADB launched its Asia Solar Energy Initiative to finance 3,000 MW by 2013 in DMCs India, Thailand and China are the near term opportunities Most of the first projects were too small for direct funding by ADB (<20 MW; getting bigger in next phase)

Banks were concerned on technical risks of solar need to build due diligence capacity in commercial banks for lending to solar projects
In April 2011, ADB approved a $150 million risk sharing scheme through partial credit guarantees to commercial banks to support such projects Addresses lenders concerns on credit risks, technical risks and long tenors required for viability of solar power projects

Expected Impact and Outcome

Outcome: Solar power generating facilities under Indias NSM and state
power schemes installed and deliver energy to the grid
205,000 MWh (appx 130 MW under the Facility) of solar power per annum delivered Generation of 1.76m tCO2 reduction in total Loan tenors for projects are extended to 12-15 years

Impacts:
Successful implementation of NSM (Phase 1) Increased foreign direct investment by the private sector in the solar energy industry Long-term reduction in levelized cost of solar energy in India

Parallel Technical Assistance

ADB providing technical support to partner commercial banks to complete technical DD of projects to be guaranteed by ADB $1.25 million grant administered directly by ADB, $750,000 funded by the Asian Clean Energy Fund (the Government of Japan) under the Clean Energy Financing Partnership Facility. Engineering consultant scope of work includes:
Review of insolation data and energy yield Assess site risks and project preliminary design Commercial assessment of proposed solar technology Assessment of PV panel manufacturer and experience analysis of performance warranties, other contractual arrangements

TA includes solar training programs in India for commercial bankers, other financiers, prospective investors
March 2011: Mumbai June 2011: Delhi April 2012: Hyderabad, Ahmedabad, others

Support from UK Government

The Department of Energy and Climate Change (DECC) of the UK Government approved a grant of 6 million ($10 million equivalent) to ADB to support this guarantee facility The grant is part of the UKs International Climate Fund to promote low carbon development in developing countries The grant will buy down 50% of the annual guarantee fees for solar power projects that qualify under this scheme The objective is to reduce the overall financing costs, benefit is passed through to the project and to catalyze additional lending to the nascent sector Example of an innovative financing mechanism (non-traditional use of grant resources, proposed to be expanded under CEFPF)

Facility Progress Update

2 partner banks (L&T Infra Finance and NORD/LB) endorsed under the program 1 more bank in process 2 solar projects (one 25 MW and one 10 MW) already approved for partial credit guarantee; 2 more under review 2 bank training sessions held in India; 3 more upcoming Program is also complemented by PSOD directly funding larger solar projects:
40 MW Dahanu Solar PV Project 100 MW Rajasthan Concentrating Solar Power Project

ADBs guarantee program selected by the UNFCCC as one of 10 global Lighthouse Projects at the COP17 (Durban) under the Momentum for Change Initiative, supported by the Bill and Melinda Gates Foundation.

Thank you Program Contacts

Don Purka Principal Investment Specialist Private Sector Operations Department dpurka@adb.org Bart Raemaekers Senior Guarantees Specialist Private Sector Operations Department braemaekers@adb.org Aniruddha Patil Investment Specialist Private Sector Operations Department apatil@adb.org (Ms.) Sujata Gupta Principal Investment Specialist ADB Resident Mission in India sgupta@adb.org

ADB Solar Guarantee Facility Website: http://beta.adb.org/site/private-sector-financing/india-solar-generation-guarantee-facility