Initiative of the U.S.-India Energy Dialogue

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Piloting New Financing Mechanisms in India The USAID PACE-D TA Program is focusing on transforming the clean energy finance market in India by developing innovative financing mechanisms, and building the capacity of stakeholders (project developers and financial institutions). The program developed reports on India's energy efficiency and renewable energy financing landscape with specific recommendations on new financing mechanisms that can accelerate clean energy deployment in India. The priority financing mechanism for energy efficiency being implemented under the program is the Corporate Energy Audit Program (CEAP), a very successful model developed by the European Bank for Reconstruction and Development. Under the CEAP initiative, the bank offers energy auditing services to its industrial and commercial clients during the evaluation of their corporate loan applications. A.Srivastava, JS, MNRE; R.Watal, Secretary, MNRE; Jyoti Arora, JS, MOP and S. Padmanabhan, Advisor, USAID/India at the Launch of the Finance Reports, Oct. 2013 The program will run a pilot project on CEAP with Tata Cleantech Capital Limited (TCCL). The energy auditors and loan officers of TCCL will work with their top five client's facility managers, engineers and financing officers to review their energy consumption, conduct energy audits, and assess energy efficiency opportunities that are financially attractive. TCCL will then identify the financing needs for these projects and consider financing them as an addition to their clients' financing requirements. For renewable energy, the program's focus is on an off-grid renewable energy fund and Green Bonds. The proposed off-grid fund will support applications (which are either off-grid or rely primarily on off-grid and/or on-site renewable energy sources) to promote sustainable development or address issues such as energy access. A detailed concept note on the proposed off-grid fund has been developed and consultations are being undertaken with agencies such as Indian Renewable Energy Development Agency (IREDA), Solar Energy Corporation of India (SECI), and Energy Efficiency Services Limited (EESL) to anchor the fund. Green Bonds, popularly used in Europe and the U.S., offer benefits to project developers by providing access to international debt markets where the cost of funds are between 4 and 6 percent and have tenure over 15 years. They also benefit domestic financial institutions (FIs) as they can find exit options at any stage of the project cycle. The USAID PACE-D TA Program is exploring options to issue Green Bonds for operating renewable energy projects with well-established resources, a good performance track record, and high quality developers in India. The program is working with financial institutions like IREDA to design and develop Green Bond issues, which could be used for raising capital from international markets. A detailed concept has been presented to IREDA, which has agreed to explore this idea, combining loans from its own portfolio and exploring loan portfolios of other banks to jointly opt for international issuance of Green Bonds. 7 U.S.-India Partnership to Advance Clean Energy (PACE)

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