According to data from Saubhagya, India is officially at 99.99 per cent household electrification. However, the quality and reliability of electricity access remains an issue, as does the long-term sustainability of the country’s largely grid-based approach. There is a clear opportunity to make DRE essential to energy policies at the national and state levels by adopting a Utilities 2.0 framework – a ‘hybrid’ DISCOM model that combines centralised and decentralised energy, and both public and private companies, into an integrated, intelligent, and interactive energy network that can deliver customer-centric clean energy solutions at the lowest cost, in the fastest possible time frame.

Therein lies an unprecedented opportunity in emerging economies like India to create smarter grids, increase climate-friendly renewable energy, and accelerate rural development, while at the same time reducing state losses and better serving consumers. Moving from a traditional standalone utility-scale approach to a future where energy is digitised, decentralised, and data-driven will enable better collaboration between on-grid and off-grid electricity supply in order to optimise connections and improve lives. Promulgating a national draft mini-grid policy following a three-year delay would be the first step. Clear guidelines for private sector last-mile distribution service provision are also needed. 

Innovation:

The rural distributed solar market in India has grown rapidly. In 2018, according to a report by GOGLA, 30 per cent of the global volume share of stand-alone solar products was sold in India. The Indian government is also targeting the deployment of more than one million solar water pumps by 2022. DRE solutions include solar home systems, mini-grids, and machinery and appliances for productive-use, such as irrigation, cold storage and agro-processing. In off-grid or weak-grid areas, in addition to electrification at the household level, these technologies have a range of livelihood applications that can help boost local businesses and rural economies.

In rural Karnataka, for example, SELCO Foundation is working with local entrepreneurs to pilot productive-use appliances. As a result, a roadside food truck entrepreneur was able to expand his business to include ice-cream and soft drinks and reduce financial losses from spoilage of dairy products after he installed a 100-litre Devidayal DC solar-powered refrigerator on his truck. Another small shop owner, encouraged by the success of his 240-litre Phocos solar-powered refrigerator is now looking into other off-grid appliances that could increase his revenue, such as a blender to make fresh fruit juice or a grinder to make idli and dosa batter.

Decentralising and customising DRE technologies for rural businesses can help build the market from the ground up and result in dynamic benefits across the sector ecosystem. This should include not just the technology itself, but also the process of procuring and owning these systems, and after-sales services.

Investment:

While policy and innovation can go a long way in powering rural communities, access to the right financing is critical to social and economic development, especially in rural India. Without less expensive, longer-term finance options, distributed renewable energy companies and their customers will not be able to leverage these interventions to their benefit. At present, micro, small and medium enterprises (MSMEs) struggle to access formal credit. A report by Omidyar Network and BCG stated that nearly 40 per cent of lending is taking place today through informal moneylenders, where the interest rates are at least twice as high as the formal market.

There are some success stories where rural entrepreneurs have been able to access affordable models of financing through self-help groups, microfinance institutions, or other non-banking sources. However, end-user financing for DRE systems is uncommon, especially in tribal areas where populations are considered risky from a banker’s perspective. There is a need to change this thinking and provide rural entrepreneurs with a range of financial instruments that could best serve their needs.

For instance, SELCO Foundation, recognising finance as a major obstacle in the sector, has been working to sensitise bankers to DRE, building capacity within the banking sector – especially in rural areas – in order to create a people-focused and enterprise lending ecosystem. As a result, partnerships were built with over 30 financial institutions, many of which were first-time lenders, for clean energy systems.

Other companies, like Simpa Networks (which was recently acquired by energy multinational Engie), sell solar power systems with financing models such as pay-as-you-go for electricity that also contributes towards the total purchase price of the system. Once fully paid, the customer not only owns the system but also enjoys clean, reliable electricity for free.

There is an urgent need to think beyond traditional energy supply, and bring government institutions, banks, the private sector, and other stakeholders together to make DRE solutions aspirational for consumers, and recognize these solutions as key enablers in the national mission to end rural poverty and propel hundreds of millions of Indians into the future. By supporting rural entrepreneurship, encouraging income-generating activities using DRE solutions, and providing for an ecosystem that is conducive to sustainable livelihood options, businesses and communities in rural India can thrive and help address some of the issues related to poverty, climate risk, and fiscal sustainability.

*This column has been co-authored with Divya Kottadiel, India Communications Director of Power for All