ADB and CTF to Finance Indian Govt. for Solar Transmission Projects

The Asian Development Bank has signed an enormous $175 M loan agreement with the Indian govt. to back the construction of high-voltage transmission systems so as to evacuate power, which is generated from the solar parks to the current interstate grid. This would help in improving the reliability of the country’s grid system.

As per an official release, “The loan will be given to the Power Grid Corporation of India Ltd and will include subprojects in various locations in India. As an innovative feature, the project is designed to adopt the country systems on both safeguards and procurement at the agency level. This will be the ADB’s first breakthrough of the country system’s application to a specific project.”

Along with the ADB loan of a sum of $175 M, the project is to be co-financed by Clean Technology Fund (CTF) with a sum of $50 M. About $5.8 billion from the Climate Investment Funds is targeted at providing the developing countries with resources so as to expand their efforts in using low carbon technologies and transit to clean and renewable energy sources.

The Power Grid is most likely to make a contribution of about $135M to support the project, which is estimated to cost around $450 million. The above stated $175M loan would be from Asian Development Bank’s Ordinary Capital Resources aka OCR. The loan will have a term period of 20-years. It will have an annual interest rate (IR), which would be determined in agreement with the ADB’s London Interbank Offered Rate (LIBOR)-based lending facility. Meanwhile, the $50M CTF loan financing would come with a term period of 40-years.

It is expected that this project would improve the efficiency and capacity of interstate power transmission networks, in particular the transmission of electric power generated from the solar power parks to the National Grid.

Along with the evacuation of 2,500 MW of energy from the solar parks in Bhadla (Rajastha,) and 700 Megawatts from Banaskantha (Gujarat), POWERGRID is further adding two subprojects. These projects would help in increasing the solar energy generation by 4.2 GW and also lessen the carbon emissions by more than 7 million tons each year.

The Country Director of ADB (India), Kenichi Yokoyama said that this project would support the growing expansion of solar power in India in proportion with the Indian govt.’s objectives and their contribution to climate change by growing their share of clean, renewable energy in the entire power mix while increasing their overall power efficiency in the system.

He further added that the implementation of Power Grid’s procurement and safeguard systems would have a positive impact on the operational flexibility and autonomy. This would also decrease the transaction cost and save project implementation and preparation time.

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