Despite being one of the world’s fastest-growing economies, per capita electricity consumption in India is only about a third of the global average. About 300 million people – a quarter of the population – still live without electricity.
Rising investment in mini-grids in India signals growing business interest in the sector, despite a lack of clear government policy, as the country races to meet its goal of providing energy for all in just two years.
Husk Power Systems, which operates mini-grids in India and Tanzania, had raised $20 million from an arm of Royal Dutch Shell, Swedish state-owned investor Swedfund International and French utility Engie’s impact investment fund. Husk offers its customers a “pay-as-you-go” energy service, using mobile phones and a smart metering system.
Prime Minister Narendra Modi has pledged to supply power to every citizen by 2019, but reaching remote villages remains a challenge with high distribution losses.
Mini-grids like Husk’s and those of OMC Power, in which Japan’s Mitsui & Co invested about $9 million last year, are helping narrow the gap in states like Uttar Pradesh and Bihar, which are among the most energy-deficient in India.
India’s ministry for new and renewable energy aims to deploy at least 10,000 mini- and micro-grids in “unserved and under-served parts” of the country, with a combined capacity of 500 megawatts or more by 2021.
But the lack of a comprehensive national policy on mini-grids is a major deterrent for investors.
Uttar Pradesh is the only state with a mini-grid policy, while Bihar’s renewable energy policy includes mini-grids. A comprehensive government policy is needed for the expansion of mini-grids – otherwise for investors there are lots of questions, including exit options for when the areas have adequate grid supply.