Reports / Reports

Scale and Sustainability: Toward a Public-Private Paradigm in Powering India

Current plans to provide “Power for All” in India via the country’s utility or distribution companies (known as discoms), through main-grid extension and utility-scale generation projects, are largely polluting, slow to build, and expensive. The central utility grid is 70% coal-powered, and the proportion of fossil fuels is still expected to be greater than 50% of the energy mix in 2040, despite high targets for renewable-energy generation capacity and heavy investment in it.

Mini-grids powered by decentralised renewable energy (DRE), and operated by distributed energy service companies (DESCOs), which provide a utility-like service on a for-profit basis, can offer a long-term, solution for the underserved, which can expand rapidly and easily along with demand. DRE-powered mini-grids are quickly deployed and reasonably priced. Furthermore, if done in the right way, such mini-grids can be integrated with the main grid at a later date. Equally significant, DRE power is environmentally cleaner than coal – or diesel-generated alternatives.

There have been encouraging signs in 2016 and 2017 of Indian government interest in DRE mini-grids, both at state level, with the ground-breaking release of the first state mini-grid policy in Uttar Pradesh, and at the central government level, with movement towards a national mini-grid policy. A $2.5b plan, known as Saubhagya, is both ambitious and risky, dependent as it is upon a blend of public and private financing, but relying largely on public or quasi-public institutions to deploy and maintain. Ultimately, the sector will require long-term cooperation between the public and private sectors in order to render DESCO-model mini-grid deployments viable at scale and attract sufficient amounts of domestic and international investment.

This report argues that a public-private partnership approach could be the key to meeting India’s “Power For All” ambition. It explores how investments could include pilot projects on protocols for grid arrival and interactivity; innovative financial instruments to nationally standardise and securitise infrastructure-class distribution assets; targeted support for off-take and end-users; and insurance mechanisms to cover asset transfers, and improved feed-in tariffs and service fees to ensure long-term revenue security, depending on the model.