Can sun-soaked India fulfil its solar destiny

India has taken the lead with the launch of the International Solar Alliance. International Finance Corporation's Asia-Pacific expert - Vivek Pathak, explores what this could mean for the country and indeed the world. While world leaders debated promises and actions in Paris, the Indian Prime Minister took the opportunity to announce an international solar alliance with 121 nations to develop and deploy solar power. Perhaps, India can help shape how future generations will judge us For a country with a huge and growing energy appetite and as a receiver of abundant sunlight nearly round the year, the 100 GW solar energy target should not seem so ambitious after all. A lot seems to be going in the sector's favour:• For one, the Indian government has commitment to provide 24X7 electricity to all citizens over the next five years and achieve 40 per cent non-fossil based energy by 2030 - specific targets have been set - that are likely to provide a boost to wind and solar projects as they can be implemented in shorter time-frames. Coal-based power generation projects take about three years to go on-stream, while hydropower projects can take up to seven years to materialize. Wind projects can be completed in a year and solar, even faster.• Secondly, the government has made it easy for foreign investors to operate in the sector and allows 100 percent foreign direct investment.• Thirdly, there is a growing global interest in India's clean energy sector with international players' entry and some major acquisitions in the recent past, although there is room to do more.• Finally, the sector has experienced impressive cost reductions, with recent auctions in Andhra Pradesh witnessing the lowest bid at INR 4.63 per kWh, well below expectations. So, the cost of producing solar energy is becoming increasingly cost-competitive.Yet, for a sustainable solar economy to be in place, India will need to deliver on the utility-scale, distributed and off-grid solar promise. So what's stopping us Where is the money To meet the 2022 targets, at least $100 billion is needed in new investments in renewable energy projects (excluding another $130 billion in conventional generation, transmission, distribution and energy efficiency).The good news: we are witnessing the entry of many players - domestic and international - with the willingness to invest very large amounts. New players have shown the confidence and the appetite to experiment and take risks. There is a growing interest from equity players, financial institutions and institutional investors.Recent entrants include ENEL Green Power, based in 17 countries, which acquired a stake in BLP energy, one of India's leading renewable energy companies; Sembcorp Industries, a leading energy company operating in five continents, which picked up a major stake in Green Infra, a company with both solar and wind portfolio in India.Mobilising additional investors from around the world; incentivising foreign investors to support large-scale investment opportunities is crucial. Foreign banks have plenty of room to grow in the renewable energy space but hedging costs and inability to provide very long tenors come in the way.Apart from traditional financing sources, mobilising long-term funds and foreign investments to finance renewable projects can be of immense help. A new set of investors - including institutional and global; pension and sovereign wealth funds - need to be channelized including through corporate bond markets and innovative structures such as securitization structures. In particular, green bonds which create a dedicated fund for clean energy have been successful in channeling capital markets to fund renewables and can be leveraged further.What about the nuts and bolts

India also needs a supportive framework with adequate fiscal and / or regulatory incentives to move the renewable market toward a mature self-replicating phase.One area of focus should be strengthening grid transmission capacity and management to ensure grid-stability and adequate evacuation capacity - as rapid growth of renewable energy capacity can lead to high level of curtailment while grid capacity catches up. Indian government's plans to add transmission capacity will hopefully help avoid such issues going forward.Besides this, the financial health of distribution companies, the pillars of India's electricity sector, needs to be addressed urgently. There have been some improvements following the financial restructuring package (FRP) for discoms announced in 2012 but more needs to be done. The recently announced UDAY program (a new, more comprehensive, restructuring plan) will hopefully achieve the expected turnaround.More can also be done in proposing a standardized Power Purchase Agreement - used by all States and Central Agencies - that includes fair risk allocation, protection from curtailment risk and improved payment security mechanisms. Adopting best practice standards would go a long way in enhancing the sector's attractiveness and bring in yet more global investors.It is also encouraging to see that priority sector lending is being extended for interventions in sustainable projects linked to agriculture, for example solar water pumps. Such reforms will further improve the sector's appeal to new funding sources needed to fuel growth and reduce the cost of capital.The question of scaleIndia is rightfully targeting large scale ultra-mega solar projects, ranging from 0.5 to 3 GW, requiring big parcels of land for each such project. The government has already embarked on establishing these mega solar parks over the next seven years or so. Such projects will require astute planning, land availability at appropriate pricing, strategic execution and of course necessary clearances.India can do itIndia's Kochi airport is the world's first to completely operate on solar power - it started as a small pilot project in 2013 where the airport installed a solar energy plant with 400 panels on its rooftop - today it is fully energy self-sufficient.Multilaterals will step up to the task. For example, IFC has played a pioneering role in India's solar sector since early 2007 by making steady investments in private sector companies setting up sustainable renewable energy projects. IFC along with development partners including the Sustainable Development Investment Portfolio of Department of Foreign Affairs and Trade of Government of Australia is supporting Indian government's large scale solar projects. Through innovative approaches such as issuance of first green bonds, IFC is helping lenders to finance projects with long gestation periods. IFC structured a publicprivate partnership that assisted Gujarat government in India identify private sector partners to build, run, and operate solar rooftops to help meet state capital Gandhinagar's increasing reliance on clean energy. IFC is also working on a market-transformation program to develop a commercial market for modern off-grid solar lighting for 3 million people in rural India without access to modern energy services. Technologies supported include solar lighting and other appliances, solar home systems, and connections to renewable energy mini-grids.Replicating such projects across India will be crucial. Such projects show that private sector can contribute significantly in partnering the government in both expanding energy access and job creation.Breakthroughs in reducing the cost of efficient storage technologies can help channelize India's abundant solar and wind resources, while reducing wastage. By playing a leadership role in promoting cleaner production, achieving energy efficiency, and building scale, India can champion climate-friendly business models and help build a sustainable possibility.