To bolster investments in solar power projects, the International Solar Alliance (ISA), in its General Assembly approved the ‘Solar Facility’, a payment guarantee mechanism.

What is Solar Facility?

• It is expected to stimulate investments into solar projects through two financial components:

1. Solar Payment Guarantee Fund and
2. Solar Insurance Fund

• The thrust of the facility is to attract private capital to flow into “underserved markets” in Africa.
• The ISA would aim to crowdsource investments from various donors across the globe and proposed projects in Africa would be able to purchase payment guarantees or partial insurance premium from these funds.

Why such move?

• ISA’s mission is to unlock US $1 trillion (₹80 lakh crore) of investments in solar power by 2030 while reducing cost of the technology and its financing.

What is International Solar Alliance (ISA)?

• The ISA is an alliance of more than 121 countries, most of them being sunshine countries, which lie either completely or partly between the Tropic of Cancer and the Tropic of Capricorn.
• It is headquartered in Gurugram, India.
• The primary objective of the alliance is to work for efficient exploitation of solar energy to reduce dependence on fossil fuels.
• The alliance is a treaty-based inter-governmental organization.
• The initiative was launched by PM Modi at the India Africa Summit and a meeting of member countries ahead of the 2015 United Nations Climate Change Conference in Paris in November 2015.

Objectives of the ISA

• To mobilize investments of more than USD 1000 billion by 2030
• To take coordinated action for better harmonization, aggregation of demand, risk and resources, for promoting solar finance, solar technologies, innovation, R&D, capacity building etc.
• Reduce the cost of finance to increase investments in solar energy in member countries
• Scale up applications of solar technologies in member countries
• Facilitate collaborative research and development (R&D) activities in solar energy technologies among member countries
• Promote a common cyber platform for networking, cooperation and exchange of ideas among member countries

What does ISA formation signify?

• Climate action commitment: It symbolizes about the sincerity of the developing nations towards their concern about climate change and to switch to a low-carbon growth path.
• Clean energy: India’s pledge to the Paris summit offered to bring 40% of its electricity generation capacity from non-fossil sources (renewable, large hydro, and nuclear) by 2030.
• Global electrification: India has pledged to let solar energy reach to the most unconnected villages and communities and also towards creating a clean planet.
• Global cooperation: It is based on world cooperation irrespective of global boundaries.
• India’s Soft power: For India, possible additional benefits from the alliance can be a strengthening of ties with the major African countries and increasing goodwill for India among them.

Key initiatives

[A] Global Solar Atlas

• ISA alliance has partnered with World Bank to launch Global Solar Atlas at an ISA event at the World Future Energy Summit in Abu Dhabi.
• Global Solar Atlas is a free online tool that displays annual average solar power potential at any location in the world and thus identify potential sites for solar power generation.

[B] OSOWOG Initiative

• Under the ISA project, India envisaged having an interconnected power transmission grid across nations for the supply of clean energy.
• The vision behind the OSOWOG mantra is ‘The Sun Never Sets’ and is a constant at some geographical location, globally, at any given point of time.
• With India at the fulcrum, the solar spectrum can easily be divided into two broad zones viz. far East which would include countries like Myanmar, Vietnam, Thailand, Lao, Cambodia etc. and far West which would cover the Middle East and the Africa Region.

Implementation

• The OSOWOG would have three phases.

1. Phase I: Middle East, South Asia and South-East Asia would be interconnected
2. Phase II: Solar and other renewable energy resources rich regions would be interconnected
3. Phase III: Global interconnection of the power transmission grid to achieve the One Sun One World One Grid vision

Benefits of the project

• Attracting investment: An interconnected grid would help all the participating entities in attracting investments in renewable energy sources as well as utilizing skills, technology and finances.
• Poverty alleviation: Resulting economic benefits would positively impact poverty alleviation and support in mitigating water, sanitation, food and other socio-economic challenges.
• Reduced project cost: The proposed integration would lead to reduced project costs, higher efficiencies and increased asset utilization for all the participating entities.

Various challenges

• Lack of Funding: Providing the money for promoting solar electricity among the members is a challenge. The Alliance has very little money of its own.
• Expensive implementation: The cost of power has two components. The variable cost is the payment made for the numbers of units of electricity purchased. In addition, the buyer is required to pay a certain amount towards the fixed cost of solar supply.
• Battery-based Storage: Solar electricity is available only during the day when the sun shines. Thus, the storage of electricity is a difficult task.
• Cross-border transmission: Solar electricity has to overcome the roadblocks of transmission.  Cross-border transmission of electricity requires the establishment of transmission lines from the producer to the consumer country.
• Peak hour load:  The demand for electricity, however, is more during the morning and evening which are called “peak hours”. But it can be produced when the sun is shining.
• Climate change: Sudden overcast and rainfall in many parts of the tropics has been a major issues these days. Such weather hampers solar energy production
• Desired global consensus: It is hindered with the issues of intricate geopolitics, unfavourable economics, unwarranted globalisation and undue centralization that act against the concept.
• Highly ambitious: In a nation like India, it took us this long to connect all the regions of the country through a national grid and we are talking about ‘one world, one grid’.

Way forward

• ISA should focus on its core goals such as- aggregating demand, tariff, technical collaborations, and financial assistance for achieving its target.
• It further needs to ensure that solar benefits are clear and tangible to users beyond its cost ambitions.
• ISA should demonstrate business models that are viable for users, suppliers and financiers.
• Further, the alliance should support member countries in implementing policies to expedite these business models.
• Geo-politically, this is being touted as a clever strategy however financially and technology-wise, this has to make sense.

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