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Anita Marangoly George, Director-Infrastructure, International Finance Corporation, the private sector of the World Bank group

15 Feb 2014

Director-Infrastructure at International Finance Corporation, the private sector of the World Bank group, Anita Marangoly George, speaks to Ankita Sharma of InfralinePlus, about IFC’s interest and the scope of renewable energy in India. Excerpts.

What is the scope of renewable energy in India and where does IFC stand on that?

The renewable energy market in India offers significant potential for developers across the clean energy value chain. It is an important area of focus for IFC globally and in emerging markets, including India. In recent years, this market has expanded in India and the sector has seen significant investments. There are nearly 400 million people in India who do not have access to electricity. To sustain economic growth, India needs to add about 100,000 megawatts to its existing generation capacity of about 225,793 megawatts over the next five years or so. Renewable energy has been steadily increasing as a proportion of India’s power generation mix. More than 25 gigawatts is expected to be added from renewable energy in the next five years - a bulk of which is likely to be from wind and solar. IFC has invested in several renewable energy projects in the past, including hydro, wind, solar and biomass and is a leading player in this segment in India. We expect to continue growing our investments in the sector in coming years.

What is the focus of IFC in the renewable energy sector?

IFC is open to all commercially viable business models. Solar and wind-based generation appears to show greater ability to scale up in the medium term. Hydro power projects are also an attractive area. IFC’s strategic priorities in South Asia revolve around inclusive growth, climate change and global integration. Within climate change, renewable energy is an important focus area.

What is the quantum of investments being made in the renewable sector by IFC and what is the status of loan disbursement?

We have a global outstanding power portfolio of over $3.7 billion spread across 57 countries. IFC’s financial year runs from July to June. In India, we had invested approximately $28 million in 2012-13 and $119 million in 2013-14 in renewable energy projects. We have well diversified renewable energy investments (debt and equity) in India with a committed portfolio of around $260 million.

How do you see the renewable segment in India?

Considering the power deficit in India, IFC believes that a good balance of renewable energy projects is required to address the energy challenges facing the country and have a systemic impact on the sector. And, as mentioned earlier, IFC has been increasingly supporting the growth of renewable energy sector globally and in Asia. In recent years, the market for renewable energy has expanded in India and the sector has seen significant investments.

Which states are under consideration in India? Is there a specific selection pattern?

IFC is open to business in all states where viable projects can be set up and operated. Parts of India with good renewable energy resource, stable policies and good track record of payment to private power producers naturally are more attractive.

Which state governments are keen on an RE portfolio and are working in close tandem with IFC? Is there state co-operation?

IFC is working closely with the governments of Gujarat and Odisha for solar rooftop projects. In Gujarat, a first-of-its-kind pilot grid-connected solar rooftop power project of 5 megawatts is being implemented in Gandhi Nagar as a public-private partnership (PPP) with IFC’s advisory support. Based on the success of this project, it is being now replicated in five other cities of Gujarat - Rajkot, Mehsana, Vadodara, Bhavnagar and Surat. Besides the solar rooftop project, IFC is also considering assisting the development of offshore wind projects and exploring other renewable projects. In Odisha, IFC is assisting the state government to help set up and develop PPP projects across various sectors, including renewable energy. In addition to solar rooftop projects, we are also looking at developing a solar energy park with the Odisha government. We are also supporting the Odisha government in the formulation of a renewable energy policy with focus on solar, small hydro power and facilitating private sector transactions leading to investments in renewable energy or energy efficiency. Apart from Odisha, Madhya Pradesh has also shown interest in working with IFC for developing wind repowering projects. IFC is in discussions for developing hydro projects in Meghalaya and Jharkhand and off -grid renewable energy projects in Uttar Pradesh as well.

What are the major policy changes or incentives required from the government to promote the sector?

India’s regulatory and business environment is supportive of investments in renewables. Success of renewable projects depends on continued regulatory support. The industry is yet to reach the inflection point where the economics of renewable energy power generation drives projects with minimum government support in the form of feed-in tariffs or tax incentives. With increased private participation, the Indian renewable energy market offers significant growth opportunities for investors.

What kind of market trend do you predict for the RE sector in India? With thermal energy being the major deciding factor, how much do you think Indian RE portfolio will grow?

Despite enormous strides made in recent years, renewable energy still forms less than 5 per cent of the energy mix in India. The medium target for this is 15 per cent. There is clearly a huge potential for growth. As renewable energy gets more competitive with respect to alternate sources of energy, this trend will accelerate. Some of the key areas that will need to be addressed to take full advantage of the positive trend in commercials of renewable energy include, greater investments in grid infrastructure and/or storage technologies to allow absorption of intermitted renewable energy, policy support to develop market models such as trading in Renewable Energy certificates, easy open access to transmission and distribution and transparent multi-year visibility into charges and fees for third party sales.