Opportunity for Financial Aggregation in Rooftop Solar in India
Electricity is quickly becoming the most important energy source of this century, not just due to growing demand for electricity from industrial, commercial, residential and institutional consumers but also due to rapid electrification of other sectors such as public, personal and commercial transport.
In this article from Solar Quarter, our team members Sagar and Arun call upon both Rooftop Solar developers and financial institutions to explore aggregated financing models to enable India achieve its target of installing 40 GW of Rooftop Solar installations by 2022. Financial aggregation mechanisms such as warehouse facilities have the potential to bridge the financing gap for Rooftop Solar in India, and while bringing efficiency and cost-effectiveness to these financing transactions.
Some of the key excerpts from the article are shared below:
From just 5% share of the total Rooftop Solar market in 2013, the opex model today contributes to as much as 30% of incremental rooftop solar installations and this is also driving a significant increase in average installation size of Rooftop Solar systems.
From our primary analysis with ~14 developers in the rooftop solar market and with inputs from credible 3rd party market research firms such as BNEF, we estimate that India will add 13,000 MW of rooftop solar capacity in the next 5 years, of which at least 5,000 MW will be installed through the opex model. This represents a “direct” financing opportunity of at least US$ 3 billion.
Among these mechanisms, warehouse line of credit will play a pivotal role since it enables primary financing instead of secondary financing / re-financing, is cost-effective and is more feasible given the current size of the market. A warehouse credit facility is a Special Purpose Vehicle (SPV) based project financing mechanism where funds are advanced to the SPV to facilitate the completion over time of a series of “qualifying” projects that together aggregate into a sizable portfolio. A sample structure of warehouse line of credit is shown below:
The complete article can be read here: https://www.solarquarter.com/index.php/14045-financial-aggregation-in-rooftop-solar-the-most-attractive-renewable-energy-financing-opportunity-in-india-for-the-next-10-years
Sagar Gubbi is the Managing Partner and Arun Gopalan is the Senior Associate at Bangalore-based Ecoforge Advisors Private Limited.