International Solar Alliance proposes Common Risk Mitigation Mechanism
The International Solar Alliance has proposed setting up a mechanism to lower the risk involved in financing solar power projects. Interim Director-General at the International Solar Alliance, Upendra Tripathy said, “The ISA programme, ‘Affordable finance at scale’, launched in April 2016 sets the ground for establishment of a Common Risk Mitigating Mechanism.” This will help de-risk investments and reduce the cost of financing for solar projects in eligible ISA member countries, he added.
An official statement from the ISA said, “A concept document is being developed on the lines of a CRMM scheme to create a common guarantee fund and develop guarantee investments with a clear scope, delimitation of risk coverage and recourse options.” The target is to reduce transaction costs to mobilise the investment volumes necessary for scaling up solar energy projects.
The ISA has also proposed setting up a $300-billion Global Solar Fund over 10 years with contributions from the World Bank, Overseas Development Assurances and from the Green Climate Fund to leverage $3,000 billion in investment from the corporate sector.
An official statement said, “The allocation will be notional and will only be backed by 20 per cent of the amount to be budgeted. The risk guarantee premium may be 0.8 per cent to 1 per cent. The World Bank may administer it as a commercial project.”