India gets $1b loan from ADB for renewable energy transmission, grid expansion

Regional connectivity will be boosted to 16GW.

The Asian Development Bank (ADB) is to provide a $500 million government-backed loan and a further $500 million in nonsovereign lending to India’s national transmission company, Power Grid Corporation of India Limited (POWERGRID).

According to ADB's release, the funds will be used to build and upgrade high voltage transmission lines and substations in Rajasthan and Punjab states, as part of the Indian government’s Green Energy Corridor initiative. To increase energy delivery from India’s west to southern region, the project will also include new high-voltage direct current terminals in Chhattisgarh, Tamil Nadu, and Kerala states, boosting interconnectivity between the regions from about 10 gigawatts (GW) to 16 GW.

India is promoting the increased use of clean and renewable energy to meet growing power demand, provide universal electricity access, and increase energy self-sufficiency. Earlier this year, India announced ambitious plans to achieve a national renewable energy target of 175 GW by 2022. About 90% of this is expected to be generated from solar and wind sources which are concentrated in a few Indian states. Investment in efficient, inter-state transmission infrastructure that can address the intermittency and timing differences of renewable energy is therefore critical in supporting expansion and optimal use of renewable energy in India.

“The new transmission lines connecting renewable energy-rich areas to the national grid will enhance connectivity between the regions by bringing clean energy to more people, making the overall Indian power system more efficient, and improving India’s overall energy security,” said Hun Kim, Director General of ADB’s South Asia Department.

POWERGRID’s funding needs for the interstate Green Energy Corridor exceed $3.4 billion, while enhanced overall interregional connectivity—critical not just for renewable energy but for large power transfers and power sector optimization—will require a further $10 billion. In order to fund significant expansion plans and maintain affordability for consumers, companies like POWERGRID need to access all available and competitive sources, including multilaterals, international banks and capital markets.

“The combination of ADB’s sovereign-backed and private sector loans is an innovative financing solution that provides POWERGRID with a large, competitive and efficient source of funding,” said Todd Freeland, Director General of ADB’s Private Sector Operations Department. “Investment in India’s transmission infrastructure complements ADB’s assistance to other private sector energy projects by creating capacity for significant new energy generation, expanding opportunities for power trading, and generally improving the bankability of the renewables market.”

ADB’s financing will play an important role in helping the country achieve its ambitious renewable energy targets, as well as increasing overall interregional interconnection capacity. ADB’s presence as a key lender will also help to attract other potential commercial co-financiers and demonstrates ADB’s ability to deliver financing solutions to companies like POWERGRID by accessing the combined knowledge and experience of its regional, country, and private sector operations.

ADB, based in Manila, is dedicated to reducing poverty in Asia and the Pacific through inclusive economic growth, environmentally sustainable growth, and regional integration. Established in 1966, it is owned by 67 members—48 from the region. In 2014, ADB assistance totaled $22.9 billion, including cofinancing of $9.2 billion.