World Bank Approves $200 Mn Loan to Himachal for RE Sector Reforms

World Bank’s Board of Executive Directors has approved a $200 million loan for the Government of Himachal Pradesh to support power sector reforms in the state and increase the share of Renewable Energy (RE) in its electricity generation. The loan aligns with Himachal Pradesh’s objective of adding 10 GW of additional RE capacity to make its power supply more sustainable.

The $200 million loan, provided by the International Bank for Reconstruction and Development (IBRD), has a final maturity of 14.5 years, including a grace period of 4.5 years.

The Himachal Pradesh Power Sector Development Program, supported by the World Bank, will assist the state in optimizing the utilization of its existing RE resources, particularly hydropower, and further diversifying its RE portfolio. For instance, it will introduce 150 MW of solar capacity, resulting in a reduction of over 190,000 metric tons of greenhouse gas emissions annually.

Himachal Pradesh (HP) has set a target to become a ‘Green State’ by meeting 100 per cent of its energy needs through renewable and green energy sources by 2030. Currently, more than 80 per cent of the state’s energy demands are fulfilled by hydropower.

Auguste Tano Kouamé, the World Bank’s Country Director for India, stated, “The Program will stimulate local economic growth while replacing fossil-fuel-based energy consumption with clean energy. Furthermore, it will enable HP to establish a centralized energy trading desk, facilitating the sale of surplus hydropower to other states.”

Importantly, this program means to serve as a model for the Indian power market, providing guidelines for financing new investments in renewable energy.

Given Himachal Pradesh’s hilly terrain, where ensuring uninterrupted power supply is more challenging and restoration in case of a breakdown may take longer, the program will contribute to strengthening the transmission and distribution grid. Advanced technologies such as a demand response management system and seamless access to RE will be introduced. These advancements are crucial during peak load periods when the state would otherwise rely on expensive fossil-fuel-based power. The implementation of automated systems represents a significant step towards providing a clean and reliable 24×7 power supply, reducing power outages, and minimizing consumer complaints.

The program will also enhance the environmental, social, financial management, corporate governance, and procurement capabilities of the state’s power sector utilities and agencies, World Bank asserts. Additionally, it will create job opportunities in specialized technical and managerial fields, particularly for women. Throughout the program’s lifespan, HP power utilities will train approximately 700 female apprentices, providing them with hands-on exposure and technical training within the power sector. This initiative builds upon the National Apprentice Promotion Scheme implemented by the Ministry of Skill Development and Entrepreneurship.

The World Bank has been a keen supporter of India toward achieving its goal of 500 GW of installed renewable energy capacity by 2030. In December 2022, The Government of India, Solar Energy Corporation of India Limited (SECI), and the World Bank signed agreements for a $150 million IBRD loan, a $28 million Clean Technology Fund (CTF) loan and a $22 million CTF grant to help India increase its power generation capacity through cleaner, renewable energy sources.