The United Nations Environment Programme (UNEP) today launched a major new $7.6 million initiative with two of India's largest banking groups to offer 18,000 southern Indian households low-cost financing for clean and reliable electricity from solar power.
"This initiative helps to meet both environmental and development objectives by overcoming a major barrier to increasing the use of renewable energy – access to finance,” UNEP Executive Director Klaus Toepfer said.
In the southern Indian state of Karnataka, Syndicate Bank and Canara Bank are offering the new loans in which UNEP is "buying down" financing costs of photovoltaic solar home systems. Indian households will effectively be able to purchase systems at an interest rate of approximately 5 per cent, compared to the normal consumer lending rates of 11 to 12 per cent. The programme is made possible with support from the UN Foundation (UNF) and Shell Foundation.
By combining two banks and a number of UNEP-qualified solar home system vendors, UNF President Tim Wirth said the programme is a "market-driven approach designed to stimulate competition among vendors and ensure quality products, competitive pricing and reliable after-sales service."
Many Indian households still rely on inefficient and polluting energy sources such as kerosene, which produces negative health, environmental and social impacts. In Karnataka, even where grid electricity is available, problems of capacity shortages and inconsistent quality plague the power supply.
Despite high initial costs, UNEP said solar home systems emerge as an attractive option in the context of costly or unreliable alternatives and escalating grid power tariffs and therefore, a growing number of households are turning to solar as a matter of necessity and convenience.