The Green Energy Corridor project is a major initiative by the Government of India to promote grid integration of renewable energy and transmission of large quantity of energy from renewable sources located in resource rich regions to energy deficit areas. It was launched in 2015 with the aim of evacuating over 50 GW of renewable energy by 2022.

Wind and solar power projects are often located in remote locations far from load centers due to availability of abundant renewable energy resources. This poses significant challenges for integration of the renewable energy into the grid and its transmission over long distances to demand centers. The existing power transmission infrastructure in India was primarily designed to carry power from large fossil fuel power plants located near cities and towns. It was not equipped to handle bulk power from renewable energy projects located in dispersed rural areas.

The Green Energy Corridor project aims to address this issue by strengthening the transmission network and setting up new transmission lines that can facilitate grid integration of renewable energy projects and carry renewable power across states to major consumption centers. It involves building about 10,000 circuit kms of transmission lines along with upgrading 28 gigawatts (GW) of existing grids and creating new grids of 26 GW capacity across seven renewable energy rich states by 2022.

The impact of this ambitious project on renewable energy financing has been highly significant. By developing a strong pan-India ultra high voltage transmission superhighway exclusively for renewable energy, it has boosted investor confidence in the sector. The key impacts are as follows:

It has substantially reduced infrastructure related risks which were a major hurdle for large scale investments in renewable projects earlier. With the green corridor in place, developers now have assurance that there will be no issues of power evacuation or transmission bottlenecks once projects are commissioned.

Foreign and domestic institutional investors are showing greater interest in funding large utility scale renewable projects knowing that connectivity to the national grid has been significantly enhanced. This has resulted in bigger ticket sizes of renewable investments.

Financing costs have come down substantially as lenders perceive renewable projects as less risky given the robust offtake agreements through central/state utilities and the green corridor ensuring smooth power transmission.

Risk perceptions related to land acquisition, environmental clearances and obtaining transmission connectivity approvals have reduced. This has made under-construction projects more bankable and helped the renewable sector attract debt financing at lower interest rates.

Viability of projects located in remote resource rich areas but far from demand centers has improved multi-fold. The corridor creates new renewable energy zones and greatly expands geographical areas suitable for large scale renewable development across the country.

State-run Power Finance Corporation and REC Ltd. have become more aggressive in lending to renewable projects with assurance of bulk power evacuation. Their overall lending portfolio to clean energy space has grown significantly post the green corridor announcement increasing total investments.

It has created conditions conducive for development of ultra mega renewable parks. Investment proposals for setting up solar and wind parks with capacities of 5000-10,000 MW each have been announced based on availability of strong transmission network to handle bulk power generation.

The green corridor acts as a major catalyst to help India achieve its ambitious target of having 175 GW renewable capacity, including 100GW of solar and 60GW of wind power, by 2022. By facilitating large scale, grid-connected renewable energy deployment across key states, it aims to make clean energy the mainstay of India’s energy security and ease pressure on limited fossil reserves.

The Green Energy Corridor project has boosted investor confidence in renewable energy sector tremendously by resolving the infrastructure bottlenecks on power evacuation side. It is enabling a scale and geographical spread of renewable investments in the country that would not have been possible otherwise. It has put India on track to becoming a leading global producer of renewable power.