Scaling up rooftop solar power in India: The potential of solar municipal bonds

The adoption of rooftop solar is primarily driven by expected savings in electricity costs, the need for an alternative source of electricity, and the desire to mitigate climate change risk. However, three key barriers hinder the growth of this technology in India: high upfront capital expenditure, perceived performance risk, and limited access to debt capital.

Municipal financing, via issuance of municipal bonds, has the potential to increase debt availability for rooftop solar project developers and lower rooftop solar costs up to 12%.

The paper proposes a model, the “solar municipal bond model”, in which a municipal entity would play the role of a finance aggregator for renewable energy project developers. Funds available through a municipal bond would be disbursed to project developers via a public-private partnership. By aggregating projects, this model would allow a project developer to access the debt capital markets otherwise difficult to access.