Multilateral lending agency Asian Development Bank will provide $1 billion loan to central transmission utility Power Grid Corp for renewable energy transmission and grid expansion in India.
"ADB is to provide a $500 million government-backed loan and a further $500 million in non-sovereign lending to India's national transmission company, Power Grid Corporation of India Limited," ADB said in a statement here.
The funds will be used to build and upgrade high voltage transmission lines and substations in Rajasthan and Punjab, 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 inter-connectivity between the regions from about 10 gigawatts (GW) to 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," ADB said.
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 in the statement.
PowerGrid's funding needs for the interstate Green Energy Corridor exceed $3.4 billion, while enhanced overall inter-regional connectivity critical not just for renewable energy but for large power transfers and power sector optimisation will require a further $10 billion.
In order to fund significant expansion plans and maintain affordability for consumers, companies like Power Grid 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 in the statement.