FEATURE: A franchise for climate-smart electrification in India
Syed Abbas Hussain of CDKN Asia and Aditi Paul of CDKN India present emerging results from an initiative to boost energy access, save rural consumers money, and advance India’s climate compatible development goals.
While the luminosity of electric bulbs tears through the darkness of the night for the much of the world, there are places which are still drowned in darkness as the evening sets in.
As many as 75 million households in rural India are deprived of quality electricity or have none at all, and so there are numerous opportunities for development. TARA and cKinetics, supported by CDKN, have developed indigenous solutions to address this problem: solutions that are both feasible and sustainable. A project entitled: ‘Designing a franchise model for conversion from diesel to renewable energy in rural India’ has set out to work with existing local entrepreneurs operating diesel generators and mini-grids.
The project has been responsible for converting diesel generator-powered mini-grids to renewable energy-powered mini-grids. This approach deals with the lack of sustainability of the old system, in which the diesel generators impose high financial and environmental costs and cannot meet the high energy requirements of agriculture and enterprises. The new renewable energy powered mini-grids have the advantage of producing cleaner energy and affordable and reliable electricity. They are better able to support productive loads in areas lacking electricity, and so improve lives and livelihoods.
India’s goals in its 2015 submission to the United Nations, the ‘(Intended) Nationally Determined Contribution’ (INDC), the environment for such an initiative appears to be ripe and in keeping with national development policy objectives. Goal no.4 of the INDCs states: “To achieve about 40 % cumulative electric power installed capacity from non-fossil fuel based energy resources by 2030 with the help of transfer of technology and low cost international finance including from Green Climate Fund (GCF).”
The idea behind the project is to initiate commercially viable renewable energy pilot projects and to put in place a franchise system that is able to run the systems efficiently in the rural areas. Such an approach is also suggested in the Draft National Policy on RE based Mini/Micro grids (June 2016). The planned strategy has been to introduce a ‘hire to own’ model which would allow the master franchisor to build a strategic association with a soft funder and let the franchisee (diesel generator operator) get the lease of the renewable energy plant and equipment with an option to buy the asset after a given timeframe (such as the role that TARA and cKinetics play in this project: a combination of a social enterprise and a venture capitalist)
Diesel generator operators offer a legitimate ‘last-mile connection’ for both the government and the private sector to implement renewable energy solutions in the field. As opposed to installing solar PVs (from scratch), diesel generator operators demand less financial pressure and they have ready-to-operate mini-grids in place. The franchising system also introduces standardisation and provides diesel generator operators with access to credit.
Distributed renewable energy mini-grids have the potential of becoming an important tool of climate compatible development due to their impact on the triple-bottom line: social, environmental and economic.
Since they service micro-enterprises and generate jobs, distributed renewable energy mini-grids bolster economic development. They also generate savings of up to 35% for the consumer, which the consumer tends to invest in education or enterprise development, which in turn contribute towards improving the standard of living and strengthening the economy. The technology helps to reduce the greenhouse gas emissions, which helps to mitigate the threat of climate change and create a cleaner environment.
So far, four pilot plants have been established in the previously electricity-deficient areas of Katsa, Laliya, Shivpura and Nabigan, with the facilitation of local players. Since the programme introduces technological systems which may often be new to the residents and officials of the areas where the project is being run, there is the possibility that stakeholders may become suspicious or reticent toward the new arrangement. Project partners have found: “rural businesses are typically wary of any new ideas being introduced by external agencies – their concerns broadly emanate from lack of local presence of the proponent and the implications on their short-term income horizon.” Therefore a gradual process of engagement is required for effective awareness-raising to promote greater stakeholder buy-in at the local level.
Sustained operations and capacity building can eventually allow the electrification of an increasing number of rural villages, which can play a more inclusive role in the economic development of their country, through the generation of economic enterprises and an enhanced productivity of the workforce owing to an improved standard of living.
CDKN recognises the strong role of and need to work with different government agencies or international non-governmental organisations to create a healthy investment environment, including the infrastructure and social fabric necessary for distributed renewable energy transition in the rural agrarian economy. The time is right for creating a market which matches end-users with the electricity infrastructure they need, at a price they can afford. We aim to seize this moment and hopefully create momentum and an even stronger business case for action. We look forward to embarking on this challenge with you as our partners.