Saturday, October 24, 2020

Table of Contents for Greenitiatives

Interaction-Jeffrey Schub, Executive Director, Coalition for Green Capital

India is hugely attractive as an energy finance destination

Headquartered in Washington, D.C, the Coalition for Green Capital (CGC) is an organisation whose mission is to establish green banks at the state, federal, and international levels in order to minimise greenhouse gas emissions and maximise the deployment of clean electricity and energy efficiency.JEFFREY SCHUB, EXECUTIVE DIRECTOR, COALITION FOR GREEN CAPITAL who was in India recently to promote the concept of green banks offered SHRIKANT RAO an understanding of his organisation’s plans for India.



Could you talk of the objectives of your organisation and the role it is currently playing in the green bank space?  

We are a non-profit organisation working with the state government in the United States, with the federal government as well as at the international level on the topic of clean energy finance. The purpose of the Coalition for Green Capital’s international initiative is to utilise the same principles and concepts established for domestic Green Banks – the use of long-term, low-cost finance to encourage investments and catalyse market growth in the clean energy sector – to encourage the establishment of national green banks in other countries around the world. By a basic definition, a green bank is a quasi-public financing institution that uses limited public resources to leverage greater private investment in clean energy. This is achieved by using innovative structures and financing models to mitigate risks.  Techniques like credit enhancements, long term financing are used to increasingly lower the cost of financing to ultimately reduce the price of renewable electricity.



What is the view from Washington of India as a potential green finance destination? Tell us where the dialogues have taken your organisation in this country so far?

Countries all over the world including India have made enormous commitments to increasing the deployment of clean energy. Ultimately the Paris conversations came down to really a question of finance – where is the money going to actually come from to pay for these various projects, especially for India where there are challenges to bring in foreign investments for deploying clean energy. New clean energy finance institutions which we call ‘Green Banks’ are really successful models that have been deployed in other parts of the world and we are excited to talk about it here in India. 

In India, the challenge is: how do you grow the economy with sustainability as a core principle because no country should be forced to choose between economic development and growth and climate in carbon emissions. The kind of historical framing of you can either choose to be clean or choose to grow just has to be separated and what’s going to drive that separation where you can grow and also reduce emissions is going to come from introducing cheaper clean energy into the market. You can’t reasonably ask people to pay more for electricity or for energy in order for societies to reduce emissions because that is just not equitable. And it is a framing that’s been presented by the fortunate few strategic powers that haven’t had to make those choices historically. So the answer has to be cheap, clean and available energy. So the role that green banks have is a powerful one. Because if you lower the cost of financing for a solar project by say 3 or 3 and half percentage points on interest, that actually lowers the price of renewable power by 25 percent. So instead of paying ten cents a kilowatt hour you actually pay seven and a half cents a kilowatt hour. The reality is that the challenges for deploying clean energy have much less to do with technological barriers today than they do with political, finance and business model barriers. The cost of solar technology has come down by an unimaginable rate over the last couple of years. Wind technology, battery technology is following behind along with storage. 



Tell us of the global experience of setting up green banks and how they have been received?

To give you some examples, green banks have been established in about five states in the United States. We are working on another dozen or so. There is also a National Green Bank of the United Kingdom, Australia, Japan and Malaysia all of which are either public or quasi-public entities capitalised with public funds. There is a new fund in Switzerland which is effective like a green bank; Mazdar in the UAE has many green bank qualities.

In many parts of the world this is a very novel approach. If India is expected to have 40 per cent of its generation capacity from renewables you just can’t expect that to be subsidised. There must be a way for the public to get their money back.  Green banks offer a solution in that direction. One thing we have learned with a green bank set up is that private capital will sit on the side until they feel they understand the risks, they understand how transactions work. These transactions are varied.  Building a coal plant is more different than putting a solar on someone’s roof. But it doesn’t take that much time or experience for investors to understand.



What is your view of India as an energy finance destination?

I think it is attractive as the market is so huge.  If I were an investor, the two things I am going to consider are risk and market potential. I think green bank and regulatory mechanisms can address a lot of risk. If I am looking to put my money somewhere I would look at India where literally trillions of dollars will be invested over the next couple of decades. I think it is really appealing to invest in green energy in India.



What is your assessment on the size of the green finance market in India?

I don’t have the figures but I would say green finance in India has a very large market potential considering the fact that the International Energy Agency at a conservative estimate has assessed the total investment in renewables in India at $1.5-2.2 trillion between now and 2040.  The prospects for green banking would be huge. 


From an India perspective are you aware of specific projects which could become eligible for green financing?

I am sure considering the huge focus on renewables there would be projects that could be characterised as eligible. So if a green bank were to be established in India they would address areas of finance for such projects. All the green banks that exist presently are domestically focused on their own markets. Malaysia’s green bank only finances projects in Malaysia, Australia’s green bank finances only those in Australia. Ideally we can have international green banking. In many ways the green climate fund is a multinational fund. You need an institution like that to actually lend to projects. In terms of areas that would be popular for financing I feel distribution, generation solar rooftop and nonroof type along with storage would be most exciting.



What are the conditions attached to funding such institutions?

In most of the green banks that exist they list conditions that are usually quite broad, sometimes there is a list of very specific types of technology, it could be any type of renewable technology, it could be any type of energy efficient technology or alternative energy fuels; there are some projects where water related projects can be financed by green banks while some finance storage. Some do residential, commercial, governmental public buildings, universities and hospitals, but it’s more of strategic positioning .There are limits on the sectors that can be funded though.



So what role does your organisation seek to play in India to cater to green financing requirements? 

Our establishment may not actually be related to it, but our role would be as strategic advisor to help create these institutions, but alternately yes, we would like to help India create an entity that can effectively be a recipient and a deployer from the green climate fund from the World Bank and from private investors. This is an institution that is suitable to meet India’s needs but also flexible enough to extract capital to meet needs throughout the world.


Which are the zones around the world where the CGC is hoping to popularise green financing?

Effectively some of our top priority countries are India, Mexico maybe China. The route to China is a bit more complicated because it operates a little differently. Eastern Europe, where a lot of our international work has been done would be another area for us.



How do you plan to increase your foot print here in India?

The challenge to our network is to identify potential stakeholders and offer them an understanding of how Green Banks work through successful case studies and to tell them how they are created. The network will also provide technical assistance and consulting services to governments to actually figure out how to create a green bank here. Right now our engagement is new in India. Through the green bank network we are creating our partners and we are looking at a really long term engagement here specifically on clean energy finance and policy. Though it isn’t an official policy of our network India is very clearly our Number 1 target. We are very eager to work here, there is already a tremendous amount of innovative work done here on finance policy, innovative financial structures, the combination of very good foundational work and the really monstrous commitment the country has made in the solar sector is a growth unlike any the world has ever seen. So we are excited to be part of the growth and bring some of that capital in.  We need to build relations with key stakeholders who would include government policy makers, top leaders, and private investors in the industry which is typically how we work in the US. We need to engage more with the Indian government which inherently is very complex and challenging task especially with questions about national government vs state government. Figuring out the existing institutional landscape will be the key element. We have to see what institutions exist today and what more need to be built. We have work ahead of us in that regard. The actual predicament as to how India could implement this here could mean building on existing institutions like IREDA which is similar in a sense to what a green bank does. Different states could need their own Green Bank institutions. India is very new for us so we have a lot of work to do to define our strategy.



Do you detect urgency on the part of the government and the stake holders to have a green bank in place?

 I do think there is a great sense of urgency in here. What was appealing and exciting to me in Paris was that India was able to make the kind of commitment which was both significant and adapted to its needs. The need in India is massive growth to meet the growing demand. India’s ambitious targets sends a signal to the rest of the world that this is how you can actually grow to become a model of sustainable development. That’s why I think this is a really good time to be in India. Green banks are the way to go.

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