The Asian Development Bank (ADB) and Reliance Power Limited, one of India's largest private power developers, are joining forces to build what will be the country's largest solar photovoltaic power plant.

The project is expected to be completed by the second quarter of 2012.

"India's solar energy potential is one of the highest in the world and this plant will help kick-start large-scale, private-sector solar electricity generation in the country," said Michael Barrow, Director in ADB's Private Sector Operations Department in a press statement issued here on from Manila, Philippines.

ADB is providing a long-term loan of up to $48 million to finance the 40 megawatt (MW) Dahanu Solar Power Project located in Jaisalmer district in the western state of Rajasthan. The state has one of the highest levels of solar irradiation in India.

Reliance Infrastructure Limited, a leading private distribution company, will buy the electricity under a long term power purchase agreement to fulfil its renewable purchase obligations set by India's electricity regulators - the first time for a fully private sector transaction in solar power. The power will be distributed to households in Mumbai.

The plant marks Reliance Power's first foray into solar energy and is part of the company's plans to sharply expand its renewable energy portfolio.

The Export Import Bank of the United States is also providing funding for the project that is expected to cost around $147 million.

The project will support the Government of India's push to promote environmentally sustainable energy growth while diversifying the country's sources of energy. By supplying electricity from a clean and renewable source, India will avoid around 41,000 tons of carbon dioxide emissions a year had demand been met by conventional fossil fuel-based power plants.

The project complements other ADB initiatives in the solar sector in India, including a financing facility that provides partial credit guarantees to lenders willing to fund solar power projects of up to 25 MW. That facility is designed to help reduce risk for the private sector and mobilize long-term funding for solar energy development.

As a part of its Asia Solar Energy Initiative, ADB aims to help develop, finance and commission 3,000 MW of solar power generation capacity in its developing member countries by mid 2013.