The Asian Development Bank (ADB) has announced it will provide up to $150 million in credit guarantees to help India scale up its use of solar power as a major renewable energy source.

The guarantees will be available to local and foreign commercial banks that finance private sector solar power plants in the country.

ADB hopes the move will boost long-term funding for solar energy development and support the Government of India’s push to diversify its energy mix.

In time, the loan would encourage other lenders to put money into solar suggested Don Purka, Senior Investment Officer in ADB’s Private Sector Operations Department.

Mr Purka said: “What we do in the next 2-3 years is critical for the solar program in India. Banks that finance projects alongside ADB will become more comfortable with solar power and this in turn will eventually transform market risk perceptions and induce other banks to lend to the sector without ADB support.”

India is already moving towards greater solar energy use. The Government of India last year set up an initiative through which it intends to commission 20,000 megawatts in grid-connected solar power by 2022.

India’s solar energy potential is among the best in the world with around 300 sunny days a year.