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India receives Rs 25bn first tranche of Rs 71bn soft loan for green power grid from Germany

According to reports, the plan to create a Rs 50,000 crore green grid to evacuate solar and wind power has got a leg-up with the government receiving the first tranche of a €1 billion soft loan from Germany.

In the Rs 18,000 crore first phase, the grid will be set up in Rajasthan and Tamil Nadu, both of which have substantial wind and solar power capacity. Work has begun in these two states. Subsequently, work will begin in Maharashtra, Gujarat, Karnataka and Andhra Pradesh.

“The first tranche (of Rs 2,500 crore) of the euro 1 billion (Rs 7,100 crore) loan has been received for the first phase,” planning commission member B K Chaturvedi told Financial Chronicle.

The euro loan agreement was signed during renewable energy minister Farooq Abdullah’s visit to Germany along with prime minister Manmohan Singh earlier this year.

It is basically a huge grid upgrade project to catalyse higher wind and solar power generation. Gradually, it will be extended to the entire country.

An additional 30,000 mw solar and wind energy capacity is to be added in five to seven years. India has a potential to generate 100,000 mw of wind and 200,000 mw solar power. The country now has 25,000 mw wind power and 1,000 mw of solar power capacity.

The state-run Power Grid Corporation will use the loan to create the new transmission system and strengthen the existing one. The soft loan guaranteed by the government will carry an interest rate of 2-3 per cent.

Renewable energy capacity is growing rapidly with the cost per unit of generation of wind power coming down to just Rs 4-4.50 and solar power to Rs 6 -6.50 per kwh.

The cost difference between thermal power and renewable energy has narrowed substantially. About 16 per cent of global final energy consumption comes from renewable resources, with 10 per cent of all energy from traditional biomass, mainly used for heating, and 3.4 per cent from hydroelectricity.

But India needs to solve its grid connection issues. “The intention is to a provide transmission system so that the potential is fully tapped,” Planning commission member B K Chaturvedi said, citing the example of Tamil Nadu where surplus wind power capacity in windy seasons went waste for lack of grid connectivity. When the green grid comes up, this power can be wheeled to other parts of the country.

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