ADB Solar Energy Initiative Funding for Reliance Power’s 100-MW Solar Thermal Power Project in Rajasthan

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The Asian Development Bank (ADB) will lend India’s Reliance Power $103 million to help finance a 100-MW concentrating solar power (CSP) plant that is to be built adjacent to the 40-MW Dahanu solar photovoltaic (PV) farm in Rajasthan, the ADB announced April 24. Reliance’s Rajasthan CSP project is ADB’s first CSP financing, as well as one of India’s largest solar power projects.

“This 100-megawatt plant will help meet growing energy demand in India, in a way that avoids emission of harmful greenhouse gases,” said Michael Barrow, director in ADB’s Private Sector Operations Department. “We hope that the success of this project will spur others to invest in the solar energy sector, which has massive potential in India.”

Reliance’s Growing CSP Project Portfolio

Reliance estimates that the Rajasthan CSP plant will avoid more than 250,000 metric tons of carbon dioxide emissions a year compared a coal-fired power plant of equivalent capacity. Due to be completed in May, 2013, the project will cost around $415 million to build. Other bilateral agencies and local lenders are providing the remainder of the project’s construction cost.

This latest project is Reliance’s second utility-scale CSP project announced in Rajasthan. It recently awarded Areva Solar a contract to build Asia’s largest CSP installation in the western India province, a 250-MW project comprised of two 125-MW CSP plants using linear fresnel reflector technology, the Economic Times of India reported April 13.

Reliance was one of the project bidders chosen by the Indian government to develop 470-MW of CSP solar power projects under the Jawaharlal Nehru National Solar Mission (NSM). As per the NSM, India intends to have 2-GW of solar power capacity installed by 2013, 10-GW by 2017 and 20-GW by 2022.

International lenders and foreign governments, including the US Export-Import Bank, are playing a large part in supporting financing of solar power projects as India works to realize NSM goals. The fourth-largest energy consumer in the world, coal-fired power plants provide 65% of India’s electricity supply.

Can India Reach its National Solar Mission Goals?

Large-scale, centralized and capital-intensive, Indian banks’ have committed a large portion of the maximum amount of capital they can by Indian regulations lend to the power industry to financing the building of coal-fired power plants. Those loans have them bumping up against a 15% cap on lending to the power industry, S. Vishvanathan, the CEO of SBI Capital Markets, the investment banking arm of the State Bank of India was quoted in a Bloomberg News report.

“A shortfall in commercial project finance could stall the solar industry in India, one of the biggest growth markets, adding to the woes of panel makers like First Solar Inc. (FSLR) and Suntech Power Holdings Co. which are looking to India and China to offset plummeting sales in Europe,” according to Bloomberg’s report.

Supranational agencies such as the ADB are stepping in to bridge the gap. India will need at least $3.2 billion of debt finance in the next three years to complete already announced solar projects, the ADB estimates. Under its Asian Solar Energy Initiative, ADB intends to commission or support installation of 3-GW of solar power capacity in developing member countries by May, 2013.

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