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Green banks for green energy

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Jeffrey Schub is the Executive Director of the Coalition for Green Capital (CGC), a US based non-profit organisation. It works towards building “Green Banks” to accelerate the growth of clean energy markets across the globe. On his recent visit to India, Schub spoke to Sapna Srivastava about the concept of Green banks and organization’s initiatives in India.

At the recently concluded Climate summit in Paris, India committed to increase its renewable energy capacity to 175 GW by 2022 i.e. going from present 13% to 40% in installed renewable energy capacity in next seven years. A humungous task, which according to Schub requires a public-private partnership on an urgent basis. He said, “Supporting clean energy through subsidies and direct grants and similar exercise are good for building initial market uptake for the newer technologies but do not help in bringing the market to scale as it’s just too expensive for the government to sustain or grow over a long period.”

This is where a Green Bank can be the right answer. Explaining the concept, he stated that they are a relatively new phenomenon that has been successful in the United Kingdom, Australia, Japan, Malaysia and several U.S. states. “Green Banks are public entities created to partner with the private sector to increase investment in clean energy. It provides low-cost, long-term financial support by leveraging public funds through the use of various financial mechanisms. This helps attract private investment so that each public dollar supports multiple dollars of private investment.”

A Green Bank is established through a coalition of stakeholders including thought leaders, policy makers, private investors and industries, environmentalists, project developers, clean tech trade associations, banks and state agencies. It can be through an administrative action or a legislation to legally create a green bank. ”India could build on existing institutions like IREDA or build new ones to pair capital from varied sources in to one innovative structure. The time taken, ranges from six months to two-three years from ideation to actual running institution The green bank focuses domestically and each state could have its own green bank. Our role is of strategic consultant to help set up such institution that suits Indian needs and attracts capital from across the globe.” Schub said.

India urgent need is to immensely increase the generation and supply of power for increasing citizen demands. And as an investor, India offers huge market potential with low risk making it a lucrative energy finance destination for investors from all over the world.

The Coalition for Green Capital has identified India as a major target to foster clean energy market apart from Mexico, Eastern Europe and China and is working with The Organization for Economic Co-operation and Development (OECD) to facilitate the sharing of experience between green banks and countries interested in creating them. Currently, this model has been successfully implemented in the UK, Australia, Switzerland, Japan, Malaysia, Masdar in UAE and five states across the US.

As Schub puts it, the way forward for India is to encourage public sector funding which is more profitable than offering subsidies as the money comes back. “The states should gradually reduce subsidies, simultaneously increasing public lending for clean technologies projects as they pay for themselves. The major issue is the implementation given the federal government structure and inequality in power pricing across the states. The part of the answer is to operate green banks or such financial institution in tandem with government aims and policies. Passing a law to create Green Bank will give it institutional strength, a source of public capital and power to issue green bonds.”

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