Targeted municipal bonds could be one way of financing rooftop solar projects

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Published: March 27, 2018 5:26:38 AM

The policy is also currently geared towards nurturing industrial roof top generation more than residential rooftop generation, making the latter unattractive despite the overall potential for generation and energy sufficiency of households.

municipal bonds, solar projects, rooftop solar, India solar targetIndia’s ambitious solar target—100 GW by 2022—envisions at least 40GW of rooftop solar taking off in the country. (IE)

India’s ambitious solar target—100 GW by 2022—envisions at least 40GW of rooftop solar taking off in the country. However, at the current rate of progress, it is doubtful if the country would be able to achieve even half the installed rooftop-solar capacity by then—as of December 2017, a mere 982 MW capacity had been created. Ironically, though, rooftop solar was the fastest-growing segment in the renewable energy space in FY17, on the back of government support for creation of such facilities. Yet, costs, and access to finance, remain a barrier.

The policy is also currently geared towards nurturing industrial roof top generation more than residential rooftop generation, making the latter unattractive despite the overall potential for generation and energy sufficiency of households. Discoms aren’t also too enthused since they believe rooftop generation could hit their business, and there is not much to speak of in terms of uniform policies on net metering that will allow homeowners to sell excess power to utilities. On the issue of access to debt financing, a working paper by Icrier researchers, produced in collaboration with Climate Policy Initiative and the Stockholm Environment Institute, posits an interesting solution—it proposes that this financing be done through what it calls “solar municipal bonds”, wherein the municipal body becomes a finance aggregator for project developers, with part of the funds coming from municipals bonds disbursed to developers on a PPP approach, similar to the design-build-finance and operate model.

By aggregating dispersed projects, this will let developers also access debt capital that couldn’t be accessed before given how more than half the rated municipalities in India are rated investment grade or above. However, like the Icrier paper points out, there is no statutory mandate for municipal bodies to promote power generation and the solar bonds will need to be assessed separately for credit rating, with the ratings of the regular municipal bond having not much bearing on this. That aside, getting a municipal body to function as a financier will be a complicated legislative exercise. Nevertheless, the idea seems promising—rich city corporations like Pune’s or New Delhi’s or Surat’s could consider this.

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