The International Solar Alliance is planning to launch a pilot program to promote the implementation of solar power projects across the world. It plans to provide financial guarantees to project developers in order to promote investments.
A study to implement the Common Risk Mitigation Mechanism (CRMM) was recently presented by the International Solar Alliance (ISA). The study calls for the implementation of a program to implement 20 gigawatts of capacity across the world. The basic idea behind this pilot program is to distribute the financial risk of developing solar power projects and pool that risk into a guarantee fund called the Paris Guarantee Fund.
For the pilot phase, a guarantee of $1 billion will be provided which, the stakeholders expect, will attract investments worth $15 billion to set up 20 gigawatts of solar power capacity. If this pilot is successful, a similar approach will be adopted to implement a total of 1,000 gigawatts by 2030.
The feasibility report for implementation of the CRMM was supported by 17 countries, including India, France, Australia, Mali, Nigeria, and Namibia. India and France were the proponents of the ISA, while the planned pilot will benefit under-developed solar power markets, like those in Africa, the most.
The high cost of generation and lack of infrastructure are the biggest issues for widespread solar power development in under-developed solar power markets. The guarantee fund will help cover these costs and countries to hedge against financial risks.
“The pooling of risks would reduce double counting of risk variables, providing a single guarantee cover at prices lower than the additive price of existing insurance products. A multi-country effort of this nature gives me hope that a clean energy transition is possible and actionable,” said Arunabha Ghosh, CEO of Council on Energy, Environment, and Water, one of the stakeholders that worked on the feasibility study.