Will A New ADB Loan Help To Solve The Great Transmission Problem In India?

Why India Needs An Updated Power Transmission System

India which is set to become one of the largest solar markets globally suffers from a weak transmission and distribution system for power. The country is investing in building a nationwide grid for the existing conventional power plants. However, it needs to speed up the process and double its investments so that the whole system can run smoothly and efficiently.

Foreign development banks have long been aiding the funding of solar power projects in India. Since Indian banks are already saddled with huge non-performing account balances, nothing much can be expected out of them. Moreover, India is a capital-starved country and hence the only source of funds can come as loans from these banks. ADB, KFW, EXIM have already committed billion dollar funds to support the development of Indian solar industry. The Indian government plans to double solar park capacity to 40,000 MW in three years by adding 50 new ultra-mega solar parks.

Charanka Solar Farm in India

Read about Power Transmission problems in other countries in the world.

Once again, Asian Development Bank (ADB) has come forward to lend $175 million to help build the transmission infrastructure in India. The absence of adequate transmission network is a major hurdle in the further progress of the country and this loan comes as a huge relief. This $450 million transmission project is expected to connect solar parks to the grid and generate 4.2 GW of solar power. The loan will be given to Power Grid of India for a period of 20 years. Power Grid has also agreed to contribute $135 million to the project.

The new transmission lines will help in transferring 2,500 MW of power from Bhadla (Rajasthan) and 700 MW from Banaskantha (Gujarat) solar parks. In addition, Clean Technology Fund (a component of the Climate Investment Funds enabling transformation by providing resources in developing and emerging economies) will also co-finance a $50 million facility to help the project.

Also, read List of largest Solar Farms in the world.

The project is expected to improve the efficiency and capacity of the interstate transmission network in India. It is also estimated to cut down carbon emissions by over 7 million tonnes every year. Thus, excess solar energy from states with surplus power could be easily transferred to power-deficit states. Old, inefficient and insufficient transmission infrastructure remains the largest deterrent to the growth and mass adoption of renewable energy (both solar and wind) not only in India but also largely in China and Japan. It is a welcome effort by the foreign banks and Indian government to take a huge step in this direction.