NEW DELHI, November 25, 2014. The government has declared its commitment to raise the share of renewables, particularly solar energy, in the total energy mix of the country from 20 Gigawatts now to 100 Gigawatts by 2020, marking a five-fold expansion from 6 per cent to 15 per cent.

This was stated here today by Mr. Piyush Goyal, Minister for Power, Coal, New and Renewable Energy, Government of India, while inaugurating the first of its kind FICCI-UNEP Conference on Designing a Sustainable Financial System.

A US$ 100 billion investment in the expansion of renewables is doable and fundable for which viable business model would have to be devised to make makers want to lend for the development of the sector, he said, adding that “Subsidies are no solution to the attracting investment.

Bankers, he said, needed to reorganize their lending norms  in such manner that auto and  home loans could be clubbed along with the installation of rooftop solar panels. He advocated the use of escalating tariff for solar power to achieve grid parity over a five-year term.  A more realistic interest rate with staggered repayment, could perhaps be the answer to solar energy expansion, he said.

The Minister said solar panels and other related equipment could be installed in arid and non-agricultural land on a 20-25 year lease and the land owner could be paid compensation with the funds generated by the investor. Such a model would do away with the need to acquire land, he emphasized.

He said two new power schemes have been launched by his ministry – the Deen Dayal Upadhyaya Gram Jyoti Yojana  for providing 24x7 power to every farm and home in the rural areas and the Integrated Power Development Scheme for urban areas. The government also proposes metering transmission of power from the generation  up to the consumer  point so as to monitor and segregate pockets with  T&D losses and theft. Once this is done, the discoms would be able to cut down their losses without having to raise tariffs, he pointed out.

The amendment of Electricity Act 2003 put renewables in focus and place larger targets to buy RE and strictly imposing RE generation. He mentioned that like Renewable Power Obligation (RPO), the government will bring  Renewable Generation Obligation (RGO) for every power generator to also generate renewable energy in their mix. Strict enforcement of RPO and RGO will be done with stiff  penalties.

Mr. Goyal announced that the Global Investors Meet on Renewable Energy would be held in New Delhi on February 15-17, 2015 and renewed his call for making India the Renewable Energy Hub.

The Minister launched the UNEP India Inquiry for Design of a Sustainable Financial System for India with an Executive Briefing that was released at the conference. FICCI is steering the UNEP India Inquiry and the India Advisory Council of the UNEP India Inquiry which is being chaired by Ms. Naina Lal Kidwai.

Mr. Ashok Lavasa, Secretary Ministry of Environment, Forests and Climate Change, Government of India, in his keynote address, stated that  huge amount of funds were required for combating climate change for which eight nations missions have been launched. As many as 22 states in the country have prepared action plans for whci about US$ 30-35 billion were required.  These efforts will be scale up by identifying new missions for phase II of the programme, he added.

He said financing was required for development, equity and climate change and mitigation. In this effort, contribution would have to come from the promoters, domestic resources would to be tapped and the Internal Rate of Return (IRR) would have to be looked at. Simultaneously, international funding would have to be factored in for success in achieving the objectives of the national missions.

In this context, Secreatry Lavasa urged FICCI for devising a scheme to do large scale afforestation and trade credits for development purposes.

Mr. Nick Robins, Co-Drector, Inquiry into the Design of a Sustainable Financial System, UNEP,  in his presentation, said the Inquiry which has a two-year mandate for reporting late 2015, aims to seeks answer three basic questions, viz,  why should rules governing the financial system be used in pursuit of green & inclusive outcomes ? What  rules governing the financial system have been, and might be deployed as effective instruments? And how  rules can be deployed given the complexities  and  competitiveness concerns of financial actors and nations.

It seeks unravel how can environmental risk assessment be implemented across banking, insurance and investment sectors to anticipate future shock; what are the key policy options to mainstream sustainability in the world’s largest asset class; how can securities, investment & accounting rules strengthen voluntary leadership to drive both disclosure and use of sustainability information.

The focus, he said, should be on realising the strategic role of the central bank in  sustainable development, aligning policies for financial regulation, infrastructure and sustainable development,

deepening sustainability risk management – environmental stress tests , capital re-balancing via a strategic policy framework for equity & debt capital markets and extending responsibility for financial institutions – assessment, stewardship & transparency

Ms. Naina Lal Kidwai, Chairperson, India Advisory Council of the Inquiry, Immediate Past President, FICCI and Counrty Head, HSBC India, in her remarks,  stated that reforming the financial system will be an essential aspect of the transition to a green and inclusive economy.  Policy and institutional changes will need to address the financing gap for meeting the key priorities on clean energy, environment, and low carbon growth path.  Bankers and investors are also recognizing the need for reforming the financial system to complement traditional environmental and sustainability policies.

She said that clean energy for example has financing challenges from both lenders and borrowers perspectives.  Renewable energy projects today require large upfront investment and due to higher prevailing costs have reasonably long payback periods.  Despite favourable policies and support being provided by the Central Government and State Governments, lenders are reluctant to provide financing for renewable energy projects.  Lenders are wary about off-taker risk with regard to a number of states given their financial health.  Additionally, banks in India face structural challenges due to their sectoral exposure limits.

Financing of renewable energy projects fall within the power sector exposure limits, which also includes large thermal coal or gas based power plants.  The large amount of credit extended to the fossil fuel based power sector has caused banks to reach their respective exposure limits thus limiting their appetite for renewable energy projects.  Given these challenges, the sector needs additional policy and structural reforms and assistance from the Government to empower the lending community to finance clean energy projects.