ISA says it aims to facilitate private investments in developing countries by setting up a guarantee mechanism for investors and making solar an energy source of choice in these countries
The inaugural session of the sixth International Solar Alliance (ISA) Assembly kicked off earlier today. Union minister for power and new & renewable energy, RK Singh, who is also the president of ISA, said there’s a “culpable sense of urgency” to act and commitment to solar is not merely an environmental choice now but a must for humanity’s well-being.
The ISA is an intergovernmental agency, with 116 member nations, that mobilises action on climate change by promoting solar energy solutions and was started as a collaborative effort between India and France at COP21.
The session touched upon various subjects like facilitating private investments in developing countries, sharing insights from India’s experience to build policy frameworks in member states, capacity building of African states to maximise RE funding, etc.
First comes funding
Talking about investments in renewable energy, Singh said government and public investment is not enough and it is absolutely essential to create an attractive environment for investors by setting up a guarantee mechanism to assure the investors about timely returns. According to ISA, the alliance has been working on getting more investments for Africa, which receives barely 3% of the funds going to renewable energy development globally.
Ajay Mathur, director general, ISA, said globally, the solar industry saw $310 billion in funding last year and it can reach about $380 billion this year. However, a marginal amount reaches Africa due to “perceived risk” of defaulting payments. So, ISA has formed a Global Solar Facility with an insurance fund and payment guarantee mechanism.
Overall, there’s been a repeated emphasis on reigning in private investments to achieve energy parity and making RE more lucrative for investments from private players, including blended finance.
During agenda adoption, the ISA said it is increasing the range of viability gap funding (VGF) for Least Developed Countries (LDCs) and Small Island Developing States (SIDS) projects, which creates a bankable project pipeline by reducing the finance cost. Earlier set at 10%, the VGF by ISA now could be in the range of 10%- 35%, depending on the varying needs of member states. Singh addressed Germany and France, the developed nations present at the session, to contribute to this fund.
Ibrahim Matola, minister of energy, Republic of Malawi, intervened during the session and suggested forming an avenue that will facilitate collaboration between the MInistry of Finance and the Ministry of Energy in member states. This would ensure that RE production is taken seriously in the national budgets, Matola added. Several ministers supported his views and also requested India to share insights from its experience to create a fertile ground for RE investments. Singh responded by saying that India would share insights from its experience in forming regulatory framework, dispute resolution and insurance components to attract private investments.
ISA currently has 27 projects in LDCs and SIDS, which include solarisation of parliament in Republic of Malawi, building solar cold storage in Republic of Seychelles, solarisation of schools in Republic of Kiribati, among others. Eleven out of these 27 projects are completed, with others to be completed by December this year and March next year.
Mathur said ISA is working on making solar an energy source of choice. For this, ISA is working not only on big projects, but also enabling multiple projects such as development of mini solar grids and parks, rooftop solar, solar cold storage, etc.
ISA is also looking to identify start-ups and train them to foster internal national organisations in member states to enable the investment efficiently. Having identified about 20 such startups in Africa last year, ISA is working with them to build their capability to receive equity investment and develop tech partnerships so that some of these startups can be the “amazon of solar services” in Africa.
ISA is facilitating over 9.5 GW of solar applications in 55 developing countries, including LDCs and SIDS, and has already provided training to nearly 4,000 people across the developing world on ways to make a living by supporting solar energy. Mathur said, “We are working on developing STAR Centres in countries that will be a hub of technology, knowledge, and expertise on solar energy. In addition, ISA is enabling solar mini grids to provide universal energy access, especially where grid extension is too expensive.”
During the press conference, when asked about ISA’s role in tripling the renewable energy capacity by 2030, Singh said the goal is aspirational as different countries have different domestic circumstances. As for India, the country has already multiplied its solar capacity by 35 times in the past seven-eight years. But right now, the challenge is that money is not reaching where it should, i.e. Africa, where about 733 million homes don’t have access to energy. “For those countries, energy transition is meaningless because they do not have access to basic energy. The mission of ISA is to enable access to energy in these countries,” said Singh.
The following days of the assembly will see the release of multiple reports by ISA on solar markets, investments and technology.