The International Finance Corporation (IFC), an arm of the World Bank, is planning to launch a new financing facility to pump-prime PV development in emerging markets, PV Tech has learned.
The initiative will make US$250 million available for a number of ‘PV service providers’ (PVSPs), special vehicles for developing small-scale PV projects in emerging markets.
The PVSPs will primarily target 2-3MW commercial rooftop and small ground-mount projects in countries where the economics of PV compare favourably with grid or diesel generation, but where finance is difficult to access.
The IFC’s solar energy industry specialist, Guido Agostinelli, said that despite its huge potential in developing countries, PV faced numerous deployment challenges, the most significant of these being its initial cost.
“In emerging countries you have to face the fact that PV requires a large up-front investment – it has low operating costs, but essentially you need to pay up front. And often we’re dealing with companies or people who are not able to set aside the financing needed for solar. So the financing conditions and the need for financing solutions are often a barrier,” he said.
Agostinelli revealed that the PVSPs would combine equity from the IFC’s US$250 million fund with equity from selected sponsor bodies. The sponsor bodies are likely to be companies with substantial PV development knowhow, able also to offer engineering, procurement and construction (EPC) expertise, and warranty facilities.
“The facility will target service providers that want to develop, deploy and manage portfolios of PV installations in selected countries where we’re going to start,” he said.
“You should think of these like project developers who have the possibility to manage their assets and the contracts related to the assets like they are an IPP [independent power producer].”
The PVSPs will be responsible for identifying clients for whom a rooftop or small ground-mounted PV system for distributed generation makes sense, and for assessing the financial strength of potential clients.
They will then install, own and operate these systems and will collect payments over a pre-agreed period from the clients.
“We see this approach as a win-win solution for both the PVSP and the client – the PVSP can scale up installations while for the underlying client the repayment collected by the PVSP will not change, unlike electricity bills which are more likely to go up over time,” said Anastasia Gekis, senior investment officer at the IFC
Although the IFC has so far yet to formally launch the PVSP concept, the organisation is hoping to set up the first PVSPs over the coming year.
Initially the body is aiming for 10 PVSPs, although more will be considered if there is sufficient demand, Gekis said.
As a member of the World Bank Group, IFC focuses exclusively on developing private sector activities in developing countries.