A Design Case Study for The U.S. – India Catalytic Solar Finance Program

This case study, produced for the U.S. – India Catalytic Solar Finance Program (USICSF), analyzes barriers to scaling rooftop solar in India's Micro, Small and Medium Enterprise (MSME) sector. It proposes a Credit Guarantee Mechanism (CGM) to mitigate risks of payment delay and default, thereby unlocking debt financing for Renewable Energy Service Companies (RESCOs) serving low-rated or unrated MSMEs.

• India faces a significant gap in achieving its 2022 rooftop solar target of 40 GW. As of March 2018, the installed capacity was approximately 2.53 GW, meaning the country needs to increase this capacity by more than 15 times within four years.
• The rooftop solar market in India is primarily concentrated in the Commercial and Industrial (C&I) segment, specifically among large corporates and high-credit rated entities. Growth has plateaued because Micro, Small and Medium Enterprises (MSMEs) lack the credit ratings required to access finance under the existing Capital Expenditure (CAPEX) and Power Purchase Agreement (PPA) models.
• The primary barrier to expanding rooftop solar for MSMEs is a lack of access to debt financing. This is driven by lenders' concerns over payment delays and payment defaults by off-takers, as well as a lack of collateral and historical credit benchmarks for MSME entities.
• The report proposes a Credit Guarantee Mechanism (CGM) as a bilateral loss-sharing agreement between a CGM Trust Fund and lending institutions. The CGM is designed to cover 50% of uncovered losses (losses remaining after the use of a Debt Service Reserve Account), split into a Liquidity Backstop Pool (5% of uncovered losses) for payment delays and a Partial Loss Guarantee Pool (45% of uncovered losses) for payment defaults.
• Financial modeling indicates that the CGM can significantly leverage donor capital. Specifically, one million dollars of donor grant capital invested in the facility can enable US$14 million of capital mobilization and the installation of 18 MW of rooftop solar capacity.
• To scale the rooftop C&I segment to 10 GW, the report estimates a required CGM fund of US$ 412 million, consisting of a US$ 56 million Liquidity Backstop Pool and a US$ 356 million Partial Loss Guarantee Pool.
• The authors recommend that the Ministry of New and Renewable Energy (MNRE) launch the CGM as a funded public intervention, utilizing host financial institutions to manage the facility and improve access to commercial bank financing for third-party rooftop solar projects.

APA

Singh, V. P., Bagaria, R., Nirmal, V., Khandelwal, A., Purkayastha, D., Bhatt, U., & Shrimali, G. (2018). A Design Case Study for The U.S. – India Catalytic Solar Finance Program. Climate Policy Initiative. https://www.climatepolicyinitiative.org/wp-content/uploads/2018/10/Credit-Support-Pathways-for-Rooftop-Solar-Projects-in-India.pdf

Chicago

Singh, Vaibhav Pratap, Resham Bagaria, Vijay Nirmal, Aparna Khandelwal, Dhruba Purkayastha, Upendra Bhatt, and Gireesh Shrimali. A Design Case Study for The U.S. – India Catalytic Solar Finance Program. Climate Policy Initiative, 2018. https://www.climatepolicyinitiative.org/wp-content/uploads/2018/10/Credit-Support-Pathways-for-Rooftop-Solar-Projects-in-India.pdf.

Wikipedia

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BibTeX

@techreport{singh2018design, author = {Singh, Vaibhav Pratap and Bagaria, Resham and Nirmal, Vijay and Khandelwal, Aparna and Purkayastha, Dhruba and Bhatt, Upendra and Shrimali, Gireesh}, title = {{A Design Case Study for The U.S. – India Catalytic Solar Finance Program}}, institution = {Climate Policy Initiative}, year = {2018}, month = oct, url = {https://www.climatepolicyinitiative.org/wp-content/uploads/2018/10/Credit-Support-Pathways-for-Rooftop-Solar-Projects-in-India.pdf}, urldate = {2026-08-17}, note = {Indexed by Climate Insights Directory} }