India can be the global leader for SDG7; will it seize the chance?
by William Brent, Power for All
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For good reason, sub-Saharan Africa gets much of the attention when it comes to the global effort to eradicate electricity poverty for 1.1 billion people. It is home to more than 600 million energy poor spread across nearly 50 countries. But it is highly possible that India, home to 300 million unelectrified, could deliver Sustainable Development Goal 7 (SDG7) — universal access to modern, affordable, reliable and sustainable energy by 2030 — when considering the country achieves the decentralised renewable energy (DRE) scale needed to to deliver this goal.
India has a strong central government with support from the states. It has a thriving innovation and startup economy. It is building infrastructure and supply chains for needed capacity. And it has access to money for R&D and deployment — not just for rural household power, but for so-called “productive uses” such as agro-processing and manufacturing. It also has the desire and ability to leverage its international stature and market size to partner in Africa and other low energy access countries. These are all ingredients for further cost reductions and global scale.
In September 2017, Prime Minister Modi announced the Saubhagya scheme, a bold goal of electrifying all households in India in 15 months (by December 2018), and he promised US$2.5 billion to help states to get there. It is no secret that the Indian government’s electrification dream is based on grid extension. It is also becoming increasingly clear to many in both the public and private sector, however, that such a dream will be impossible to achieve without a primary role for DRE. In fact, at current official rates of rural electrification, it will take years, not months, to meet the new deadline for SDG7.
Decentralised solutions must take a front seat if India is to provide universal access.
India has already decided that states and the private sector will play leadership roles in the future of energy infrastructure, especially generation and distribution. This is perfectly suited for the DRE sector, which is dominated by innovation-driven private sector players who are already nimble enough to navigate a customer base — the rural poor — that state-owned power companies, already deeply in debt, avoid as being unprofitable and too complicated to manage.
Energy poor states such as Odisha, West Bengal and Assam are already working to figure out how to build integrated energy action plans that incorporate DRE as a key component to reliable, affordable rural electrification. Bihar and Uttar Pradesh, the two states with the highest number of energy poor, also are taking steps to increase the role for DRE, and their new chief ministers, are both from the same ruling party as Prime Minister Modi. After Uttar Pradesh promulgated the first state-level mini-grid policy, it has quickly become the leader in number of mini-grid deployments, reinforcing the strong link between policy certainty, sector growth and investment.
Whether it’s electricians, loan officers, sales force, manufacturing, standards and quality assurance, hardware design or IoT and software, India has the pieces in place to scale DRE and create significant job opportunities. The Skills India campaign, with a goal of training 500 million youth by 2020, including those in villages, will help. Renewable energy is one focus of that training, although more is needed specifically on electricity access. At the same time, civil society and social enterprises are working to build capacity in other areas, such as banking, women’s entrepreneurship and micro-enterprises (see here and here). Moreover, the recent introduction of a Goods and Services Tax (GST) is expected to discourage imports of DRE products and increase domestic manufacturing and assembly, potentially adding greater scale and capacity.
While pioneering new DRE services and appliances for homes and building consumer awareness and rural distribution for basic access, India is also the global leader in applications that will take decentralised renewable energy further than lighting and phone chargers. Programs such as the Rockefeller Foundation-funded Smart Power India, are clearing a path to scale mini-grids, including developing a Utility-in-a-Box solution that offers a pathway to standardisation and scale. Private ESCOs are pioneering new mini-grid business models that are virtually battery free, or based on anchor loads from cold storage, irrigation and other productive uses, while civil society is working to enable rural healthcare and education via DRE. Solar irrigation alone is estimated to be a US$60 billion opportunity in India.
Energy access is a massive economic opportunity in India — some estimates put it at $48 billion a year by 2030.
Yet despite that prize, the sector is smaller than its potential. A new report from India’s DRE industry body Clean Energy Access Network (CLEAN), based on partial data for Fiscal Year 2016–17, showed that India’s DRE sector deployed 3.6 million solar lanterns, 92,000 solar home systems, 206 mini-grids and 144 productive use projects during the period. It could be growing more rapidly with more supportive policy, and the finance that such policy would unlock.
It was a positive signal that the World Bank loaned India US$625 million to install 100 MW of grid-connected rooftop solar on commercial, institutional and industrial buildings, but India should seek the same level of support from global financiers for DRE. Some encouraging signs are emerging, such as an expected US$100 million Green Climate Fund facility for DRE in India, as well as several debt facilities that will help provide longer-term, lower interest debt.
The expected finalisation of a new National Energy Policy (NEP) and the first national micro- and mini-grid policy, expected to come out by the end of 2017 after languishing for two years, can also play a critical role in providing additional policy support for DRE to take its proper place. The NEP proposes the creation of an Energy Access Fund, which will be needed following the diversion of billions of dollars in revenue from a coal levy that was previously earmarked for renewable energy projects. India also has almost 300 active micro-finance institutions, second only to Bangladesh, which can play an enhanced role.
While scale must start at home, the opportunity for India is global when it comes to achieving SDG7, and the government has taken some encouraging steps. In 2015, it pledged up to a US$2 billion line of credit to Africa to develop clean electricity access projects. Since then, the government said earlier this year that it had received interest from Indian companies to install 664,000 solar pumps, install 56 MW of solar mini-grids and train 5,400 solar mechanics in Africa. These activities will take place through the International Solar Alliance (ISA), an initiative announced by India and France at the Paris climate talks. The ISA is expected to officially launch in 2017.