Dialling in from Thailand, Deepali Khanna, Senior Associate Director of the Rockefeller Foundation, talks to us about the Smart Power for Rural Development initiative and the new opportunities it is creating by supporting the development of mini-grids in India.
Listen to the Q&A or read the full transcript below.
Power for All: Could you tell us a bit about Smart Power for Rural Development and some of your biggest breakthroughs to date?
Deepali Khanna: Smart Power for Rural Development is the Rockefeller Foundation’s three-year initiative, where we provide clean energy via decentralized mini-grids. This initiative is trying to deliver reliable electricity and catalyze economic development for rural populations in over 1,000 villages in Bihar and Uttar Pradesh, two very important states where access to energy is a huge issue. This initiative is the first of its kind to provide electricity access because it is not just looking at lighting but also using energy for productive use. It is leading to the creation of new enterprises and is driving productivity for existing enterprises. The initiative is also creating a more inclusive economy by creating energy access for more than a million people.
On the breakthroughs to date, we are gathering unique insights on a couple of aspects. The first one is on the technical role out of mini-grids and the second one is around consumer demand. The next important piece is the willingness to pay because when you are looking at rural areas in India there is that limit around people’s ability to pay, and we are seeing that customers are making clear choices. Even in some of the villages where we have our mini-grids, the electricity tariff is lower than what is being charged by the mini-grids that have been set up. So people are willing to pay more in an exchange for more reliable electricity. However, they are still paying for clean power which costs less than expenditure for other sources of electricity such as diesel generator sets or kerosene lamps. That’s an important breakthrough for us.
The next important aspect is the impact on economic and social life that has given us confidence in viability and scalability of the Smart Power model. So for example, now we have 85 operational plants and we have over 4,700 customers, including households, micro-enterprises and telecom towers. After getting connected to our mini-grids about three-quarters of micro-enterprises reported an increase in their customer base and many of the commercial establishments also started to diversify and expand their businesses. For household users the electricity access has improved their livelihoods and made it easier for them to do domestic chores, for studying, or for women and young girls to feel much safer. The telecoms tower operators are also relying a lot less on diesel as a back-up. So I think these are some of the significant breakthroughs that we have seen through this initiative.
Power for All: What are some of the key actions from stakeholders—businesses, customers, policy-makers, that have enabled you to get as far as you have with the Smart Power initiative?
Deepali Khanna: So let me start with the policy makers. We have been working very closely with them to really promote an enabling environment that facilitates investment in the mini-grids sector. There is now concrete action which has been taken by the national- and state-level policy makers and the regulators to really align the mini-grids development and streamline the approval processes. This is significantly reducing market uncertainty and increasing opportunity. If you talk to any developer, one of the biggest risks that they were facing was that there wasn’t really any policy framework to fall back on in case there were any challenges that they faced. This has really been something that is very significant. For example the Ministry of New and Renewable Energy worked out how, within the off-grid and decentralized application program—particularly with the National Solar Mission—they have incorporated the mini-grid work and how they are going to be supporting this sector.
The forthcoming mini-grid policy in the state of Uttar Pradesh is also a welcome sign that the state government is keen to leverage the full potential of the sector by creating a more favorable environment for investors, energy serving companies and entrepreneurs.
We are working very closely with five energy serving companies who are actually operating the 85 plants on the ground. We are also seeing a number of new energy serving companies entering the market, many of whom could benefit from the technical support that our Smart Power India—that is a subsidiary company of The Rockefeller Foundation—is providing to get them to become market ready.
Another important stakeholder is the community organizations with whom we are working, such as TARA [Technology Advancement for Rural Development] which are really helping the energy serving companies with community engagement as well as micro-enterprise development work.
The mini-grid sector needs a range of investors to build the market and we are helping to set up a mini-grid financing facility that can grant different forms of capital to help drive the sector.
Power for All: To achieve even greater scale, what do you feel will be the secret to catalyze the market further in India?
Deepali Khanna: Firstly increased capital investment and the enabling policy environment are going to be critical to reach scale.
There is a requirement for capital investment from a broad spectrum of channels that is needed. We at the Foundation are really interested in attracting commercial investors into this space and will be collaborating with others to establish an off-grid financing vehicle in 2016. I think that is really going to be important to reach scale.
On the policy side we believe that the alignment of mini-grid development with the national electrification program will bring more investor confidence and help the developers with the ease of business. Once the operational frameworks and technical protocols are adopted by centralized state governments there will be the potential for mini-grids to co-exist with the national grid—and I think this is going to be really important.
India and the Indian companies can be at the forefront of the global mini-grid sector by the Government really focussing more on the policy framework, which will really help attract a large investment. The needs in India are pretty significant and there is not one player that can really respond to it. Working across the different stakeholders and bringing them together to create more synergy will be how India can achieve more scale, and really reach out to the millions of rural villagers who still don’t have access to energy.