Today, in Washington, DC, President Obama and Prime Minister Modi announced new initiatives that can catalyze investment in the renewable energy space and potentially have a transformative impact on the lives of hundreds of millions of people, living in energy poverty, in India and across the world.
The joint statement by the two leaders, signaled serious intent to bring modern energy to people living far from the electric grid by launching two initiatives aimed to spur investment in clean energy organizations that often have the drive and the technology, but struggle to raise equity capital. Launched as a part of the International Solar Alliance (ISA), which the US intends pursuing membership to, the two countries will equally support establishing the following facilities:
1. A $20-million U.S.-India Clean Energy Finance (USICEF) initiative, which will help mobilize up to $400 million to provide clean and renewable electricity to up to 1 million households by 2020.The USICEF seeks to provide funding for early stage projects helping entrepreneurs develop their project ideas into bankable proposals. This can potentially include funding for technology assessment, environment impact studies and project design.
2. The U.S.-India Catalytic Solar Finance Program: which will set up a $40-million fund provide financing for small-scale renewable energy investment, "particularly in poorer, rural villages that are not connected to the grid." This program aims to make equity investment in clean energy organizations and thus help bring more US and Indian private investors on board.
Financing is key to unlocking energy access for over 400 million people in India, and about 3 billion people worldwide, who are still dependent on hazardous biomass and kerosene for their cooking, heating, and lighting needs. Many innovative small-scale organizations, despite developing practical solutions and profitable business models to reach and serve this disaggregated market, have difficulty attracting mainstream capital, due to the high risk perception associated with the off-grid market. Together the two initiatives are expected to leverage over $1 billion of investment, and can galvanize the underserved off-grid markets in India and provide a scalable template for similar investments across the world.
While the new initiatives are a welcome step towards stimulating clean energy investments, over $140 billion of financing is required in the next six years to reach India’s solar, wind and efficiency targets to increase clean energy access. NRDC and partners are working with the Indian government in exploring innovative financing mechanisms that can help foster low carbon development and achieve the Modi government’s goal of 24/7 energy for all by 2022.
Clean energy finance cooperation between two of the world’s largest GHG emitters is a crucial step towards combating climate change that is already affecting millions of people across the world. A robust US-India partnership can play a transformative role in finding implementable, cost effective solutions for clean energy access, facilitating financial flows, and paving the way for rapid clean energy deployment around the world.
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