By Joshua S Hill
German developmental bank KfW last week signed a €200 million loan agreement with India’s state-owned Rural Electrification Corporation to support the development of renewable energy in rural areas throughout India.
The Frankfurt-based KfW (formerly KfW Bankengruppe) announced last week that it had signed the loan agreement with the Rural Electrification Corporation (REC) which will pass the funds on to investors in the form of low-interest loans for the development of renewable energy production such as wind and solar in rural India. The loans must be accompanied by contributions of up to 30% from the borrowers as well as contributions from other banks under syndicate financing packages.
When all is said and done, KfW is hoping its investment will contribute to the development of around 200 megawatts (MW) worth of clean energy which could save up to 285,000 tonnes of CO2 each year, and supply electricity equivalent to the needs of 270,000 rural homes.
“India ranks third in the list of countries with the highest CO2 emissions,” explained Professor Joachim Nagel, Member of the KfW Group Executive Board. “In light of the ongoing growth in the economy and population, demand for electricity will also continue to rise. KfW’s financing to promote the increased use of renewables will make an important contribution to slowing the rise in greenhouse gas emissions and reducing the deficit in the power supply.”
Germany has been involved in partnering with India’s energy sector for over 40 years, and according to a KfW spokesperson, “The overall objective is to contribute to an inclusive, technically and economically efficient, socially and ecologically sustainable energy supply and use.”
According to a KfW spokesperson, the bank has an ongoing portfolio of approximately €2.4 billion, of which €1 billion “has been committed to the Indian Green Energy Corridors Programme, supporting the development of the evacuation and transmission infrastructure for renewable energies.” KfW has also provided a further €825 million “for renewable energy generation financing” such as the 150 MW Sakri Solar PV Plant in Maharashtra.
“Particularly under the Indo-German Solar Energy Partnership, with which concessional funding of up to €1 billion is envisaged to be provided by 2020, additional investments are currently being prepared,” said Dr Charis Pöthig of KfW. “Further areas of cooperation will particularly focus on Energy Efficiency and Energy Distribution Investments.”
There is significant renewable energy development taking place across India, thanks in part to the Government’s intention to grow renewable energy capacity to 175 gigawatts (GW) by 2022, accounting for nearly half of the country’s energy generation capacity.
Solar power is expected to dominate the future renewable energy mix with as much as 100 GW, while wind power is expected to contribute around 60 GW. Biomass and small-scale hydropower is expected to add 10 GW and 5 GW respectively.
“This is yet another step towards promoting renewable energy in India after having more than tripled our financing in renewable sector last year,” said Dr P.V. Ramesh, Chairman and Managing Director of the REC. “The partnership reflects the commitment of both the institutions towards sustainable development.”