Solar Transmission Sector Project (RRP IND 49214)

DEVELOPMENT COORDINATION

A. Major Development Partners: Strategic Focus and Key Activities

1. Central transmission. The Asian Development Bank (ADB) has a long-standing relationship with the Power Grid Corporation of (POWERGRID), having provided eight sovereign-guaranteed loan facilities totaling $2.525 billion, 1 and two nonsovereign loans amounting to $750 million. 2 POWERGRID’s satisfactory implementation capacity warrants continued engagement by ADB, which coordinates complementary actions with the World Bank, POWERGRID’s primary development partner. Since 1993, the World Bank has provided POWERGRID with six loan facilities totaling $3.2 billion. In 2012 and 2014, the International Finance Corporation also extended two nonsovereign operations. Through helping to integrate India’s national grid system network, ADB and the World Bank aim to facilitate the transfer of power among India’s regions and states by increasing the system’s reliability and efficiency. ADB also supported the first public–private partnership project for transmission between POWERGRID and Tata Power on a build-own-operate-transfer basis.3

2. Grid integration of renewable energy. India’s Green Energy Corridor initiative will (i) facilitate the transfer of renewable energy from renewable energy-rich states to other states, (ii) improve absorption, and (iii) address the intermittency of such power sources. The initiative includes interstate connections that will transmit electricity generated from solar and wind resources in and Rajasthan to the major load center and an interregional grid connection point at Moga, Punjab. In 2014, German development cooperation (through KfW) loaned POWERGRID €500 million to fund the first three parts of the initiative’s interstate scheme. This includes transmission lines and substations connecting Gujarat with Rajasthan. ADB, through the Green Energy Corridor and Grid Strengthening Project, funded the fourth part of the interstate scheme, including a transmission line from Ajmer through Bikaner, Rajasthan to Moga, Punjab. Thus, the KfW and ADB projects provided parallel, and coordinated cofinancing for the interstate green energy corridor.

3. Solar energy. ADB has long supported India’s solar power development programs, and was the first development finance institution to provide financing for solar parks in Gujarat in 2011 and in Rajasthan in 2013. In 2015, the Government of India increased its solar power target for 2022 from 20 gigawatts (GW) to 100 GW (40 GW from rooftop solar projects and 60 GW from medium and large utility-scale projects). The government also developed a revised Clean Technology Fund Investment Plan,4 including (i) a rooftop solar program; (ii) solar park transmission evacuation infrastructure; (iii) solar park infrastructure; and (iv) the generation of solar energy by the Solar Energy Corporation of India (SECI). The World Bank and ADB are expected to finance the program.

1 This includes three sector loans (approved in 1995, 2000, and 2004), two project loans (approved in 2011 and 2015), and one multitranche financing facility with three tranches (approved in 2008, 2009, and 2011). 2 ADB. 2011. Report and Recommendation of the President to the Board of Directors: Proposed Loans Power Grid Corporation of India: National Grid Improvement Project. Manila; and ADB. 2015. Report and Recommendation of the President to the Board of Directors: Proposed Loan Power Grid Corporation of India Limited: Green Energy Corridor and Grid Strengthening Project. Manila. 3 POWERGRID initiated the process of inviting private participation in the transmission project. The joint venture company was established between POWERGRID (49% of the total stake) and Tata Power (51%) to construct a 1,113-kilometer transmission system from the Bhutan–India border to Delhi to evacuate power generated by the Tala hydropower station in Bhutan. 4 Government of India. 2015. The Revised Investment Plan for India. Delhi. 2

4. In 2016, ADB provided financing facilities for rooftop solar project development through a financial intermediary. The World Bank and KfW also did the same through different financial intermediaries; the Asian Infrastructure Investment Bank, and the New Development Bank are currently in the process of developing similar facilities. In 2013, ADB invested $2 million in Simpa Energy India Private Limited for deploying prepaid, off-grid solar home systems in Uttar Pradesh. With regard to medium and large utility-scale project development, ADB funded the 40-megawatt (MW) Dahanu solar photovoltaic power project through private operations. It also supported India’s first utility-scale solar photovoltaic facility, and a 100-MW concentrated solar power project in Rajasthan, which was commissioned in December 2014. In 2014 and 2016, ADB funded 300-MW solar photovoltaic projects through which foreign and domestic investors entered into power-purchase agreements with SECI and state distribution companies. KfW provided concessional financing for the development of the 125-MW Sakri solar photovoltaic plant owned by the state generation company. The World Bank is processing a financing facility for utility-scale solar projects through SECI.

5. Several other development partners also support solar transmission development and grid integration. The Indo-German Energy Programme supports decentralized renewable energy expansion, including the deployment of solar energy solutions for electrification. Germany also provides technical assistance for forecasting, balancing, market design, network management, and grid integration of renewable power. The United States Agency for International Development is implementing the Partnership to Advance Clean Energy Deployment program, which includes support to commercialize clean energy technologies through capacity development, regulatory support, and increased access to clean energy finance. The New Energy and Industrial Technology Development Organization, Japan conducted a smart grid demonstration project in Haryana.

Major Development Partners Amount Development Partner Project Name Duration (million) Electric Transmission–Central Sector Level ADB Loan: Power Transmission (Sector) Project 1995–2003 $275.0 Loan: Power Transmission Improvement (Sector) Project 2000–2007 $250.0 Loan: Tala–Delhi Transmission Project 2003–2006 $62.3a Loan: Power Grid Transmission (Sector) Project 2004–2012 $400.0 Loan: National Power Grid Development Investment Program (MFF 1) 2008–2015 $400.0 Loan: National Power Grid Development Investment Program (MFF 2) 2009–2015 $200.0b Loan: National Power Grid Development Investment Program (MFF 3) 2011–2015 $76.0 b Loan: National Grid Improvement Project 2011–Ongoing $500.0 Loan: National Grid Improvement Project (NSO) 2011–Ongoing $250.0 Loan: Green Energy Corridor and Grid Strengthening Project 2015–Ongoing $500.0 Loan: Green Energy Corridor and Grid Strengthening Project (NSO) 2015 – Ongoing $500.0 World Bank Loan: Power System Development Project I 1993–2000 $350.0 Loan: Power System Development Project II 2001–2006 $450.0 Loan: Power System Development Project III 2006–2011 $400.0 Loan: Power System Development Project IV 2008–2015 $600.0 Loan: Power System Development Project IV (additional) 2008–2015 $400.0 Loan: Power System Development Project V 2009–Ongoing $1,000.0 IFC Loan: Power Grid 2012–Ongoing $100.0 Equity: Power Grid 2014–Ongoing $20.4 KfW Loan: Green Energy Corridor Project: Interstate Transmission 2014–Ongoing €500.0 Solar Energy ADB Loan: Rajasthan Concentrating Solar Power Project 2012–2014 $103.0 Loan: Clean Energy Finance Investment Program 2014–Ongoing $500.0 Loan: Off-Grid Prepaid Solar Leasing Project 2015–Ongoing $6.0 Loan: Mytrah Wind and Solar Power Development Project 2016–Ongoing $175.0 3

Amount Development Partner Project Name Duration (million) World Bank Loan: Grid Connected Rooftop Solar Program 2016–Ongoing $625.0 KfW Loan: Sakri Solar Power Plant 2012–2013 €250.0

Loan: Promotion of Green Power 2015–Ongoing €100.0 JICA Loan: New and Renewable Energy Development Project (Phase 2) 2015–Ongoing ¥60,000.0 ADB = Asian Development Bank, IFC = International Finance Corporation, JICA = Japan International Cooperation Agency, NSO = nonsovereign operations, MFF = multitranche financing facility. a ADB provided a private loan of ₹3.05 billion to a project company where POWERGRID was the minority stakeholder. The indicative amount in dollars is based on the exchange rate at the time of loan approval. b Of the $200 million approved, $76 million was later canceled and reintroduced as Tranche 3. Source: ADB.

B. Institutional Arrangements and Processes for Development Coordination

6. With many development partners supporting solar and grid expansion and integration in India, the Ministry of Power, Ministry of New and Renewable Energy (MNRE), and Department of Economic Affairs in the Ministry of Finance are actively working to keep the various development activities from overlapping. To promote the solar park initiative, including the transmission evacuation schemes, the MNRE allocated specific states to each development partner when requesting their support. The Ministry of Power has also identified separate projects for the Green Energy Corridor to be supported by ADB, the World Bank, and KfW. ADB maintains an ongoing dialogue with other development partners working on solar and grid integration, and has provided them with synergy effects based on lessons from its early engagement in solar parks in Rajasthan and Gujarat.

C. Achievements and Issues

7. The government recognizes the challenges involved in acquiring land for solar project development, and is inviting project investment in solar parks where the land is acquired and prepared by the state government. Private investors have responded favorably to this approach, which has created competition among investors and lowered tariffs for solar park development in some states. However, the geographic concentration of renewable energy requires effective grid management strategies to mitigate any impacts on grid stability. The government and its development partners recognize this as a focus area requiring continued coordination. In supporting the development of India’s central and state utilities, ADB and the World Bank have worked to ensure that their actions are complementary, and have coordinated the geographic demarcation of their state operations. Thus, ADB has supported the states of Assam, , Gujarat, Himachal Pradesh, Madhya Pradesh, and Uttarakhand; and the World Bank has assisted Andhra Pradesh, Haryana, Odisha, Rajasthan, and Uttar Pradesh.

D. Summary and Recommendations

8. During project development and loan processing, ADB discussed the project and financing plan with the World Bank, KfW, GIZ, and the Japan International Cooperation Agency. Coordination among these development partners will allow the continued leveraging of their efforts to support more sustainable deployment for solar power and grid integration. Regular discussion and coordination will also continue during implementation.