Government-sponsored banks that funded India’s nascent solar industry when commercial lenders were wary may begin curbing financing, according to an official from a U.S. agency that finances developing country projects.
The Overseas Private Investment Corp., based in Washington, is close to its limit for lending to projects in India, Peter Ballinger, OPIC’s director of business development, said in an interview in Hyderabad. Multilateral lenders like the Asian Development Bank and the World Bank’s International Finance Corp. “could start having some constraints too,” he said.
The banks were some of the earliest to finance solar power generation in Asia’s third-largest energy consumer. Projects in India now account for 8.5 percent of OPIC’s total loan book, nearing its 10 percent limit for any one country, he said.
India aims to complete its first major round of solar photovoltaic plants by January and hold its second national auction of permits to build another 350 megawatts of capacity this month. Total solar installations reached 125 megawatts as of the end of October after more than doubling since June.
The progress shows it may be time for development banks to start withdrawing support for the industry, Ballinger said.
“We’re supposed to be catalytic,” for new industries by providing financing at an early stage until more traditional lenders get comfortable with the risks of new technologies and businesses they’re unfamiliar with, he said. “It may be time for commercial banks to step in,” to India’s solar sector now that it appears to be ramping up, he said.
Solar power proponents currently building plants that have been backed by the development banks include billionaire Anil Ambani’s Reliance Power Ltd. (RPWR) and New Delhi-based Azure Power.
