Secure and reliable electricity access with renewable energy mini-grids in rural India. Assessing the co-benefits of decarbonising the power sector

Energy access is essential for economic and human development and is an important driver for the progress of India. Access to modern forms of energy, especially electricity, becomes even more important for the socio-economic development of rural areas (which lag behind urban areas in terms of infrastructure). “Full electrification” to achieve social and economic development goals (and SDGs) in India requires 24/7 electricity access for every household, family and local enterprise, even in rural communities. To achieve this goal, successive Indian governments have focussed on providing access by extending the centralised grid while still trying to incentivise the use of decentralised off-grid solutions through renewable energy sources such as solar and biomass. Although a considerable number of villages and households have gained access to the grid, the reliability and quality of power supply still remain a growing challenge for rural consumers. Mini grids have thus emerged as pivotal in providing ancillary services to the grid and improving the level of services to last-mile consumers. To this end, a number of private companies have emerged, setting up mini-grids in unconnected villages in order to bridge this electrification gap and drive economic development around rural clusters. Nonetheless, investment in renewable-powered minigrids in India still lags behind, partly because of a lack of replicable and sustainable models in the face of subsidised grid-electricity tariffs that make alternative solutions cost uncompetitive. This study assesses the viability of renewable-energypowered mini-grids to both drive and support economic growth in India from the perspective of augmenting the current electrification of rural areas. This is carried out in the context of the COBENEFITS project with the aim of assessing the range of additional benefits1 resulting from a low-carbon energy transition in India. For renewableenergy-powered mini-grids to thrive alongside the conventional grid in a sustainable manner, mini-grids will have to match the grid – in terms of cost-competitiveness, capacity and affordability – while remaining profitable and viable. The study employs a dual approach comprising a qualitative “on the ground” assessment of the social benefits in three rural communities in India, combined with a techno-economic analysis to determine the factors that affect the economies of scale of mini-grids (specifically solar-powered mini-grids) and their suitability for supporting socio-economic development in rural areas of India. This approach is chosen to ensure transferability of the case study findings obtained for rural India. Data and test variables used in this study are India-specific and are drawn from detailed stakeholder engagements, and are in alignment with local conditions (at the time of compiling this report). This study focuses strictly on solar-powered-mini-grids in India to represent the term “mini-grids” within the Indian context.