OECD on Transmission Grid Financing in India: Experience and Implications for Policymakers
SDG 7: Affordable and Clean Energy | SDG 9: Industry, Innovation, and Infrastructure | SDG 13: Climate Action
Ministry of Power | Central Transmission Utility of India Limited (CTUIL)
The OECD Environment Working Paper No. 268 (2026) titled ‘Transmission grid financing: Lessons from international case studies and toolkit for policymakers’ provides an in-depth analysis of various transmission grid financing models and offers a practical toolkit for policymakers to select and implement suitable models for their national contexts.
It identifies the global power grid as a critical bottleneck for the energy transition, noting that annual investment must double to USD 600 billion by 2030. India emerges as a global leader in overcoming these constraints, having tripled its transmission grid size over the last decade. To meet rising demand, India plans to add 191,000 circuit kilometers by 2032 through a mix of public and private investment models.
Key pillars of India’s grid financing strategy include:
Independent Transmission Projects (ITPs): By utilizing competitive bidding under BOOT (Build, Own, Operate, Transfer) and BOO models, India has successfully lowered costs and attracted private capital into a traditionally state-dominated sector.
The Green Energy Corridor (GEC): This flagship program connects renewable-rich zones to high-demand centers, leveraging donor funding and concessional loans to ensure grid stability for intermittent power.
De-risking Mechanisms: The use of standard Transmission Service Agreements (TSAs), revolving letters of credit, and escrow accounts has significantly mitigated credit risks for international and domestic investors.
Incentivizing Performance: Regulations now include penalties and rewards based on asset availability, ensuring that private operators maintain high operational standards.
What is the ‘Build, Own, Operate, and Transfer (BOOT)’ model? It is a public-private partnership (PPP) framework where a private entity receives a long-term contract from the government to finance, design, and build a transmission line. The private firm then operates the asset for a fixed period (often 25-35 years) to recover its investment through tariff payments. At the end of the contract, the ownership of the grid infrastructure is transferred back to the public utility.
Policy Relevance
India’s grid evolution serves as a blueprint for Emerging Markets and Developing Economies (EMDEs), demonstrating how regulatory clarity can unlock private financing for green infrastructure.
Strategic Impact for India:
Accelerating Renewable Integration: The Green Energy Corridors are essential for achieving India’s target of 500 GW of non-fossil fuel capacity by 2030, preventing “curtailment” where green energy goes to waste due to lack of wires.
Addressing Grid Losses: India can reduce aggregate grid losses (currently close to 20%) by investing in distribution grids and advanced technologies like virtual power lines and energy management systems.
Addressing Environmental Hurdles: As investment speeds up, India must balance rapid expansion with rigorous Environmental and Social Impact Assessments (ESIA) to avoid project delays and ensure sustainable land use.
Cost Efficiency through Competition: The ITP model has proven that private sector participation can lead to lower tariffs for consumers compared to cost-plus models used by public utilities. India should continue to refine and expand it.
Attracting Institutional Capital: The stability of the ITP framework makes transmission assets highly attractive to Pension Funds and Sovereign Wealth Funds seeking predictable, long-term returns.
Follow the full report here: Transmission Grid Financing Lessons from International Case Studies and Toolkit for Policymakers