With funding support from the Asian Development Bank (ADB), India’s national power grid operator is embarking on an ambitious multi-billion dollar plan to expand the country’s power transmission grid and link stable clean energy supplies to areas suffering shortages.

ADB is extending a $600-million loan to Power Grid Corporation of India Ltd. (Powergrid) in a multitranche financing facility to fund construction of a high-voltage power transmission system to transmit clean and abundant hydropower generated in the Northern and the Northeastern regions to demand centers in the Western region and within the Northern regions.

The total cost is estimated at $2.54 billion. In addition to this $600-million loan, a potential second ADB loan of $400 million is expected to be reviewed for approval later this year. Powergrid will invest $762 million and raise the balance of funding from other financial institutions.

To meet the Government’s average annual economic growth target of 9%, electricity consumption is expected to rise by an annual 8%. While more than 80% of villages already have electricity, only 44% of total households have access to it, and in the rural areas, only 33% of households have access to electricity. Except for the Eastern and Northeastern regions, the rest of the country faces power shortages in the range of 300 to 6,000 MW, making it crucial to develop interregional power transmission links.

“This loan will help the Government of India optimize the power supply mix through greater use of indigenous hydropower resources and maximize energy efficiencies,” said Tomoyuki Kimura, Principal Energy Specialist of ADB’s South Asia Department. “Access to electricity is a key driver of economic growth and poverty reduction. The Government’s five-year plan targets providing electricity to all households at an affordable price by 2012, which will require additional generating capacity of 78,600 MW,” Kimura said. “As natural energy resources are unevenly distributed and often located far from the load centers, additional generation capacity will require development of the national power grid to ensure reliable and secure delivery of power.”

The ADB-financed Investment Program will be part of Powergrid’s five-year, $13.75 billion investment plan. The Program will increase transmission capacity by 4,500 MW to help develop clean energy sources in the Northeastern and Northern regions. The Program will also improve energy efficiency by introducing High-Voltage/Direct-Current (HVDC) technology.