Fulbright US-India Series: Amit Jain | Senior Energy Specialist, World Bank India

2022-08-17
Amit Jain is a senior energy specialist at the World Bank India team and former Fulbright scholar with NREL. Mr. Jain worked on the India's first solar project in Gujarat, and also recently led two of the World Bank’s largest solar financing schemes—worth a total of $1.5 billion. In this conversation, we will explore the World Bank’s role in the Indian renewable energy space and how the organization acts as a facilitator of capital. Hope you enjoy my conversation with Mr. Jain and Mr. Srey!

Topics covered in this podcast:

  • An introduction to the state of the solar sector in India and the World Bank’s work in this space
  • How was the WB-SBI financing of $625 million structured to help facilitate more investment?
  • In depth explanation of how WB facilitates private sector capital, through SBI example
  • What are proportionate power contracts and how are they structured?
  • Is payment security a significant challenge in India today with regards to solar?
  • Is the guarantee model implemented by Mr. Jain's team going to be replicated in other regions?
  • Did you know India would become as successful as it has become today in solar?
  • Moving forward, do you think India will continue to be a global leader in this space?
  • Mr. Srey’s insights

Transcript

00:06 Karan Takhar
Hello everyone. This is Karan Takhar. Welcome to the Zenergy podcast. Over the past decade, India has done an impressive job of integrating renewable energy into its energy mix. For this Fullbright podcast series, I sought to investigate the enabling factors and potential of India's global leadership in renewable energy, with a focus on solar. This Fulbright series is broken down into Four Seasons. In this season, through conversations with leaders who have been instrumental in developing the Indian renewable energy sector, we will highlight how India has managed to integrate 35 gigawatts of solar in just a span of 10 years. We will also explore what these leaders believe the key challenge is to be as this sector further develops. 
In this episode, I'll be speaking with Amit Jain, a senior energy specialist at the World Bank India team and former Fulbright Scholar with the NRL. Amit worked on the very first solar project in Gujarat and is leading a $2 billion renewable portfolio in India, Bangladesh, and the Maldives. 
In this conversation, we will explore the World Bank's role in the Indian Renewable energy space and how the organization not only commits capital but also facilitates cap.
I've also included a clip from Shrey Barangan, also a member of the World Bank Energy team. Hope you enjoyed my conversation with Mr. Jain and Mr. Shrey. Hi, Mr. Jain. Thank you so much for taking the time. Can you please start off by providing a background of the state of solar in India and also talk about what the World Bank's role is in this space?

02:09 Amit Jain
Then, as you know, India has set very ambitious renewable energy targets of 175 gigawatts by 2022, and also India has been providing some stable and mature policies for several years on renewable energy and the result right now is we have almost 72 to 73 gigawatts of large scale solar and wind which shows India commitment towards its NDC's made in Paris Agreement and they have shown real action on the ground, so there have been several policy initiatives by Government of India which has led to the success. One of them is a reverse auction that India has been conducting successfully of several years and now is being replicated in several other countries. So this was something India started we back in 2011, 2012. The story of India Solar started in 2009 when Gujarat launched its solar policy. State solar policy with the development of charanga Solar Park, so Gujarat came out with the state from policy even before India came out with its national submission. But after that, in 2010, India announced a modest target of 10 Giga Watt with the National Solar Mission, which was later upgraded to 100 Giga Watt by 2022 because of this of the real potential in India for renewable energy and solar in particular. Given this background, the Government of India has asked World Bank to partner with various agencies, including the State Bank of India, as I mentioned, and also with Erida, which is a central FI in India on renewables and, of course, we work very closely with the Ministry of new and renewable energy on renewable we started a partnership with State Bank of India in 2016 because while the utility-scale solar was yeah, a huge success. Solar, rooftops, and solar were still struggling in 2016 even till today, out of 35 Giga Watt contributions with solar rooftops is only 5 Giga Watt against the target of 40 Giga Watt. So so, we were asked to partner with the FBI in this regard to kick-start getting products with concessional financing and also provide technical assistance. Program to help and build an ecosystem around solar rooftop systems. At about the same time, we also partnered with Erida for a solar park project where we will finance a solar park infrastructure in these project, and as you have might have noticed, a couple of weeks back, Reva Solar part was inaugurated by the Prime Minister, where World Bank Group was involved, not only as a transition advisor and as a lender for shared infrastructure but also IFC was the debt provider to the company who installed the solar power parts of the project we're also working very closely with Coca-Cola and other institutes looking at large scale grid integration, we're also working in the area of storage locking solar so that the point is in the renewable energy sector we are working very closely with Government of India on several of these initiatives to make which target achieved by 2022 Let me stop.

05:48 Karan Takhar
I see. Thank you. Thank you. That provided great clarity. As I was reading on the World Bank's role, specifically in development finance, I came across a nice article which said that a key objective of the World Bank is to become not only a provider of capital but also a facilitator of capital, meaning incentivizing more capital in addition to what the World Bank provides and I'm curious as to like how this happens. In terms of the structures is specifically with that SBI. I think it was a 650 million or 625 million commitment, of which I read that 38% has been dispersed to date. But I could be wrong about those figures, but I'm just curious as to how the World Bank and how this 625 million is structured in a way that also helps facilitate more investment. I Would really appreciate it. Just hearing more on how this happens.

06:57 Amit Jain
Let me give two examples, starting with the Reva Solar Park, and then I will come to solar rooftops. As you know, World Bank financing is very scarce because it is concessional. So, we believe in the MFD approach, which is Mobilizing Private Sector Finance. So if we finance $1.00, we want to leverage 2-3 or even $10 by bringing in more private sector capital on top of our capital. Let's take an example of Reva Solar Park in Media Pradesh, the World Bank financing for shared infrastructure in Reva Solo part. Is only 18 million dollars, but with this financing, we were able to mobilize. $500 million of private sector capital, which installed 750 Mega Watts. This is how in a state bid like Madhya Pradesh, where international investors were initially reluctant to come in Page with the support of the World Bank Group, the Madhya Pradesh government was able to mobilize significant private sector capital with a record PPA of 2.93 at that time secondly, with State Bank of India in 2016 when we entered the market with SBI, the interest rates or solar rooftop were very high, about 16 to 17%, which were making the solar rooftop market unviable we not only entered the market with SBI, it provided concessional financing with the number of 6 and $25 million as we mentioned, but it opened the market for other commercial banks after they saw that SBI was the first risk taker in the market and the products are going very well. We had several other commercial banks and multilateral development funds who joined this revolution and put in more than a billion dollars in solar rooftops, so with $625,000,000 from the World Bank. We were able to mobilize $1.5 billion dollar of multilateral financing, which eventually led to 5 Giga Watts of solar rooftops till now by 2020, which mobilized almost $5 billion of a private sector capital. So these are two stories where you can see that the World Bank financing able to leverage private sector financing and African club.

09:24 Karan Takhar
Concessional financing, as in the World Bank, will provide capital at very cheap rates. Is that what concessional financing means, and then how does how exactly does this lead to in the shared infrastructure solar park project, for example how exactly did that 18 million World Bank commitment then we keep so much more significant private sector capital

09:50 Amit Jain
So when I say concessional financing, we have access to clean technology funds which are part of climate finance, which provide financing at 0.25% for 40 years with a 10-year moratorium. So we blend that financing with the World Bank financing, and then it becomes concessional, and then we provide it to both Erida and the State Bank Of India. In the case of the River Solar Park, we are only financing the shared perspective, which is the transmission assets, Road security inside Solar Park. The don't World Bank does not provide finance to, so the projection tries the fuller part, but with this financing of $18 million, the private sector got convinced that there are ample policies and regulatory measures taken in this solar park, and they felt confident that they should come and Invest in a structure which is supported by the World Bank Group.

10:47 Karan Takhar
Thank you. That makes a lot of sense in the article that you wrote with economic times titled The Big Leap into a sustainable future. He stated that the project had developed innovative energy contracts as opposed to most projects in the conventional and renewable sectors that still use proportionate power contracts. So I'm newly into this space, and I'm just learning about all of these different terms, so it would be really helpful if you could just give more clarity on what are proportionate power contracts and also what were these new innovative energy contracts that were introduced through this project.

11:33 Amit Jain
Usually, when a renewable energy contract is signed, it is signed with a distribution utility, as you know, so if I provide extra electrons to our utility, they will pay me a tariff of Y rupees. In the case of the reverse of the park. We opted for an Open Access policy In which the primary contract of Viva Solar Park was fine with Delhi Metro in Delhi. The other contract was signed with Madhya Pradesh Disco, which is usually the scenario. The point is, under the Open Access regime, Viva Solar Park is able to meet 60% of the demand of the Delhi metro indent, so In under this proportionate contract, we were able to meet the daylight demand of Delhi Metro, which is usually not in a case in a typical renewable energy contract which helped us in two manners. First of all, Delhi Metro is a very bankable entity. It's provided comfort to the investors that you're going to sign the PPA with a very strong entity-type guy. I'm asking 2nd DMRC, being in Delhi, was paying a very high tariff for his daily needs. They were able to save ten crores of crowds of money because of signing us a lower PPA under the River Solar Park. So the comparison Is between a usual PPA when you sign the discount versus the PPA in Rivas Olapa, where you signed under the Open Access bid Delhi Metro.

13:18 Karan Takhar 
OK, wow, that's very interesting. And on the same note, I read that the project has implemented a 3 tier payment security mechanism, and I know this issue of payment security has come up in my interviews recently. I was able to interview Human Sahai, who was in that under-page case representing a few of the developers regarding the contract sanctity, and I wanted to ask you about this whether payment security is a significant challenge in India today with regards to solar and, if so, do you believe this issue will soon be resolved?

14:05 Amit Jain
So currently, the biggest risk the country India is facing in terms of renewable energy is the off-taker risk. You must have called from other places as well. Indian Disform's parents read their financial health is not very good. There have been cases of curtailment being evolution of PPS and delayed payments of the tune of Rs.10,000 crores renewable energy contracts, so after risk remains the largest risk, we have in the country. There are two kinds of bids in 1 of the big bridge, which is backed by national-level entities like secky or entities. These bids are very strong because they have the balance sheet of NTPC, and secondly, investors, both domestic and international investors, feel very confident for these bids. The second type of bid are state bid, like the Madhya Pradesh Rivas pull-apart bit, where the PPA is signed by directly by a state. This form where the financial health is not very good International investors specifically is not very confident regarding these bids because of the off-taker risk of the state. This form is very high for these investors, so what we did in Riva Olapa was we developed A3 tier framework which we opened a letter of credit in a bank. In case there's a delay by a discom, the letter of credit can be encashed by the developer.
If this fails, the second tier was an escrow account between Madhya Pradesh and Erida, or six months of delayed payments. So the developer can encash this escrow account for six months if the discount does not even if this fails, the third tier of the framework was the state government guarantee of Madhya Pradesh, the Madhya Pradesh government said.
If everything fails, we are putting our balance sheet behind this project. We will pay it from our budget this is the first time in the history of India that the state government has put up its balance sheet against solar or renewable energy production because of the three-tier framework. Reva became a historical project which gave up the PPA prices as competitive as the Central Government Agencies like NTPC and checking and became a reference where it not only got the World Bank President award but also it became a chapter in the Prime Minister innovation book in 2017 and it was being quoted as a reference project for all the other scale companies.

16:55 Karan Takhar
So is that model trying to be replicated in other areas now?

17:00 Amit Jain
Yes, we are in discussion with now with ERIDA to replicate some of its models.

17:05 Mr. Shery Barangan
For solo group up.

17:07 Karan Takhar
In terms of moving forward and also I know you worked on the very first project within good draught. I saw that reflecting during that time. Did you know India would become as successful as it has become today in solar and, like moving forward, do you think India will continue to be a global leader in this space? Are you optimistic about Solar in India?

17:38 Amit Jain 
So if I do a flashback current, I literally can imagine ten years back. I leave this example before I was. I can visualize myself. I was in Atlas Solar Park in Rajasthan exactly ten years back. At that time, it was a complete desert, and I Was sitting on sand dunes with my colleagues from Clinton Foundation at that time in 2009, and 2010 Clinton Foundation announced a partnership with the Government of Gujarat and the Government of Rajasthan to develop and design A3 GW of solar power ten years back, and everybody thought we were crazy because at that time solar just started in Spain and Germany and in California and India was very new to solar at that time, and there we were talking about 3 GW solar path and people just thought we are insane Gujarat came up with the first solar park of 250 MW in Chanranga, and now Badlaa Solar Park in Rajasthan have more than two to three gigawatts installed already, and there are multiple phases of hardness pull apart being designed as we speak. So the point is, the vision shown by several leaders at that time is bearing truth right now, So India is very well set to become the leader in renewable energy in the future. As you know, after US and China, we are the largest consumer of energy and electricity in the whole world and this is when Karan we are only consuming 1200 kilowatts per year against China which is 3500 kilowatts and the US, which is about 5 to 6000 kilowatts per year we are expected to double our core capita consumption by 2030. So just imagine with such a low per capita consumption if India is delivering such results when our consumption will double in the next ten years. We will definitely be leaders in the renewable energy sector, and we will be cutting it across various technologies, be it storage, floating, or solar for the rooftop offshore wind. So there are many ways we have to go in other innovation and other technology, but.

20:01 Karan Takhar
You also have the opportunity to hear some quick insights from Mr. Shrey Barangan, who is an energy and climate expert at the World Bank. Let's hear what Shrey had to say

20:17 Mr. Shrey Barangan
So just quickly to whatever America has started over here, he's comprehensively covered India some solar space current if you look at the last ten years and we were discussing briefly, India Google API Investments after tune of 10 billion already of 10 billion plus actually already and that is only set to Group One of the other things that Amit works very closely on a daily basis the World Bank Partnership is ISA international solar lines is to kind of replicate some of the best practices from India across the region, right? So we are trying to see best practices across India, which can be repping Africa. We also so he lead the project that we have in bodies as well, so we are trying to replicate those examples or the successes in over there In another sort of small island developing states as well as we move forward. So there is a lot of buzz around the cross-collaboration as well right now as we speak.

21:10 Karan Takhar
Thank you. Thank you. Both. So much for your time.

21:14 Amit Jain
Thank you, Karan. Wish you all the best. I hope you enjoyed that episode, and do check out the show notes For more information on my guest. See you next time.
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