Review of Rajasthan Renewable Energy
Transmission Investment Program
with CTF Financing
Review of Rajasthan Renewable Energy Transmission Investment Program with CTF
Financing
The above referenced investment plan document for Rajasthan was reviewed to ensure that it meets the eligibility criteria
for CTF co-financed projects. The comments based on documents made available for the review are summarized in the
table below. This review was conducted by Anand Subbiah, Executive Director, McLean Development Group LLC of the
US. The proposed investment program has been subject to the Asian Development Bank’s internal peer review process
as well.
Criteria
Eligibility for Clean Technology Fund
(CTF) financing
Comments
CTF provides countries with resources Noted.
to scale up the demonstration,
deployment, and transfer of lowcarbon, clean technologies. The
proposed investment program in
Rajasthan is tailored for integration into
state and national development
objectives, and helps develop a
programmatic organizing framework
which is consistent with CTF objectives
and meets eligibility criteria. Activities
financed by CTF will be consistent with
India’s development strategy and
commitment to reduce its carbon
intensity, especially in power
generation.
Consistent with CTF guidelines the
projects will support sustainable
economic growth and poverty
Review of CTF Financing Plan for Rajasthan
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Responses
Criteria
Private Sector Participation
Comments
reduction, and help mitigate the
impacts of climate change. ADB’s
financing for the project will
supplement and provide adequate
financial resources for the state to
make investments in technologies that
address the impacts of climate change.
Responses
Private sector participation is essential
for at least 37% of project financing.
The private sector is unlikely to invest
in the transmission inter linkage for the
project but will be investing in the PV
and other RE projects which will
benefit from the power evacuation
capacity being supported by CTF
financing. The investment program
has a PPP modality where the private
sector invests in the PV array and
generation facilities and the public
sector invests in the basic
infrastructure for the project site
including the transmission lines.
The Rajasthan Renewable Energy
Transmission Investment Program
(RRETIP) will provide the state
transmission utility long-tenor
financing, a blended concessional loan
from ADB combined with CTF, to help
finance the transmission infrastructure
to evacuate power generated by
private sector renewable energy
investments to the state and national
grids.
Nearly 80% of the capacity under the
Phase 1 of the Jawaharlal Nehru
National Solar Mission is coming up
across W. Rajasthan. The state
transmission utility is preparing to
support evacuation from these and
future projects that would be rolled out
under JNNSM Phase 2 starting in
2013.
This is not unlike the CTF project in
Egypt, which supports the
development of wind farms for
electricity production and has attracted
24% co-financing from the private
sector.
Review of CTF Financing Plan for Rajasthan
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Criteria
Comments
Responses
Ministry of New and Renewable
The development of large-scale solar
Energy, Government of India studies
energy projects in Rajasthan, and India indicate that Rajasthan needs to
in general, is constrained by lack of
prepare for installation and evacuation
dedicated transmission networks,
of 8000 MW of wind and solar power
which require vast amounts of public
before 2018.
financing. CTF funds for the project
will finance development of the
necessary transmission infrastructure
needed to tap the vast solar resources
of Rajasthan. Without CTF financing,
this infrastructure development may
not take place given that the publicsector transmission company does not
have the resources required for capital
investments since its tariffs do not
provide an adequate return on capital.
The transmission company thus faces
a serious financial barrier for making
the necessary investment, and this
situation also inhibits private sector
investments in transmission. CTF
support is thus critical to develop solar
and other large-scale renewable
energy projects in the state.
The Rajasthan CTF program will help
attract private investment by financing
the complementary infrastructure, and
lowering investor risk.
Review of CTF Financing Plan for Rajasthan
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Criteria
Comments
Responses
Blending CTF resources with ADB and
other financing will make available
investment capital in infrastructure,
which may otherwise not be readily
available. The low cost financing will
be instrumental in decisions taken by
the private sector to invest in largescale solar power plants in the state.
The project will also help generators in
the state and in India meet renewable
energy procurement targets.
Potential for GHG Emissions Savings
and its Cost-effectiveness
The investment program meets the
requirement for cost-effective
reductions in GHG emissions. In fact,
the estimates are conservative and
actual reduction in emissions is likely
to be higher. The proposed
transmission projects will not benefit
from CDM carbon financing since
these benefits accrue to the distribution
companies. Also, CDM does not
typically support the financing of largescale transmission capacity.
Noted. The Project calculations for
emission avoidance are based on
4300 MW of renewable energy
capacity addition by 2018, 7761 GWh
of energy output per year and 5.4
million tons of CO2e annually.
Commercially available Technology
Transmission technology is readily
available from commercial vendors,
and there are no technical issues.
Noted. This low utilization of capacity
is a significant barrier to the
deployment of renewable energy
Review of CTF Financing Plan for Rajasthan
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Criteria
Potential for Replication and Scale-up
Comments
Project capital and O&M costs are well
understood. The only barrier to
investment in transmission for largescale solar projects is the low capacity
utilization, which further lowers the
financial return on the project –
especially since transmission tariffs are
not designed to provide an adequate
return on capital.
Responses
particularly in situations where the
energy would be sold to other regions
in the country. Reducing the impact is
being carried out by (i) Access to
concessional funding from external
sources, (ii) central transmission utility
undertaking evacuation at identified
pooling points, (iii) sharing of costs
with customers outside Rajasthan.
The Rajasthan investment program
documents state that CTF co-financing
will help mobilize future commercial
investments for replication and scale
up, which will stimulate economic
growth and facilitate the long-term
transition to low-carbon development.
The draft Report and Recommendation
of the President also states that CTF
financing will improve the overall
financial attractiveness and will help
the transmission utility undertake the
required investments till future
regulatory adjustments will allow higher
tariffs and ROE.
Noted. The state power tariff
regulations allow RVPN to claim an
ROE as part of its tariff. However, the
Government of Rajasthan has taken a
policy stance of not claiming ROE, until
the distribution companies in the state
bring down their losses (both system
and financial).
It is not clear how the above assertion
can be inferred given that investments
in transmission infrastructure for RE
Review of CTF Financing Plan for Rajasthan
Rajasthan is one of the first states in
India that have signed up to a central
government debt restructuring scheme
under which the state power utilities
and state government have agreed to
a turn-around roadmap that provides a
gradual transition in tariffs and plans
for a turn-around by 2021.
The financial projections indicate
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Criteria
Leveraging of funds
Other Implementation Risks
Comments
projects that provide intermittent power
(and result in low capacity utilization of
transmission lines) will remain a barrier
to investment. Moreover, there is no
assurance that policy or regulatory
changes will be made in the near
future that will allow transmission
companies to obtain a tariff that
provides an adequate return on capital
investments. In the absence of
revised policies and regulations, the
barrier to replication of projects that
hinge on subsidized transmission
investments will remain.
Responses
improvement in debt sustainability
levels post 2022, once RVPN starts to
claim ROE in its tariff. Softer CTF
terms would support RRVPNL till that
time.
The investment program states that of
the total investment of $800m, CTF will
provide 25% of financing and the state
of Rajasthan will provide 37.5% of the
financing. It is not clear from the
investment program documentation if
there is an assurance from the state to
make available this large investment to
the public sector transmission
company. In the absence of such
assurances, the required leveraging of
funds under CTF financing could be at
risk.
Noted. Of the $800 million facility,
$500 million will be financed through
ADB’s OCR and CTF financing and
$300 million by the Rajasthan utility
and Government.
A financial restructuring plan is under
discussion between RRVPNL and
Government of Rajasthan.
The Government of Rajasthan has
committed to finance 20% of the
investment through equity. The
Executing Agency will raise the
remaining financing over this period
through its usual lenders. Assurances
on the counterpart financing will be
included in the loan agreements.
Noted. The stated study for RRVPNL
The report prepared by AF Mercados
Review of CTF Financing Plan for Rajasthan
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Criteria
Comments
EMI states that the Rajasthan state
transmission company, RVPNL needs
to make important improvements to its
systems and controls to assure they do
not constitute a barrier for a larger
introduction of renewable generation.
The report states that though “there is
a SCADA system, there is practically
no EMS functions and the absence of
IT tools makes the operation heavily
dependent on the operators’
experience”. This is stated to be a
major barrier for large-scale integration
of renewable generation as planned for
the period up to 2017. The report
recommends that there needs to be a
“larger degree of visibility and
controllability of these plants, as well
as the inclusion of modern forecasting
and network security tools which, in
conjunction, will permit an adequate
operation of the whole Rajasthan
system.” The report recommends
“Modernization of network
management and control….and
Introduction of regulatory changes to
assure production using non
controllable generation is maximized
and that the equipments incorporated
into the network do not increase its
Review of CTF Financing Plan for Rajasthan
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Responses
helped develop a roadmap for
renewable energy forecasting, real
time management and system
security. A part of the CTF grant would
be used to support RRVPNL in
carrying out detailed system studies to
refine the rollout of the roadmap.
Investment support would be targeted
on the state load dispatch center and
sub-regional dispatch centers and
would be in conjunction with central
initiatives.
Tranche 1 funds will also support initial
efforts on integrating renewable energy
in the high concentration areas. It is
confirmed that Tranche 2 and Tranche
3 of the Investment Program will
include financing on recommended
improvements to support renewable
energy integration in the grid. RRVPNL
is also undertaking an investment
program to upgrade communication
systems across the transmission
network of the entire state.
Criteria
Comments
operational risk.”
Responses
The investment program should clarify
that the proposed investment in
transmission capacity will include these
recommended improvements. The
proportion of investments needed to
make the additional improvements to a
transmission system to integrate large
amounts of RE power may constitute
an additional risk to further replication
in the absence of subsidized financing
for transmission projects to evacuate
power from intermittent RE generation
sources.
Review of CTF Financing Plan for Rajasthan
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