Looking for a framework that will allow entrepreneurs and corporates to co-exist

US-based First Solar, one of the world’s leading solar module manufacturers and solar power plant owners, says it is willing to facilitate funding for micro-grid based rural electrification projects in India.

Solar plant-local grid combination is seen as a solution to the vast number of villages that have none or no meaningful electricity. A few hundred villages have been provided solar-based electricity by companies such as Mera Gaon Power, a start-up, and Minda NexGen Tech of the Minda group. But the challenge (and the profits) lies in scaling it up.

Government data show that 95.65 per cent of the 5.9 lakh villages have been “energised”, but to come under that definition it is enough if only 10 per cent of the households get electricity. Some 400 million Indians are said to be without electricity.

Minda NexGen Tech has done about 250 installations. However, all but one-tenth of them have been bought by companies to fulfil their CSR.

The scale-able model is where a village entrepreneur buys the solar-micro-grid system and supplies electricity to villagers, who pay him out of what they save on kerosene. “Funding is not there for the entrepreneur-model,” says Praveen Bhasin, who heads the business in Minda NexGen.

Entrepreneurs have skills but no money, large companies have access to money. “Conversely, large corporates who have access to institutional capital have not been successful in creating such assets and running them profitably in remote areas,” notes Sujoy Ghosh, Country Head, First Solar.

First Solar’s solution is to facilitate funding. “What we need is a framework that will allow both the entrepreneurs and the big corporates to co-exist. This framework is what we intend to pilot,” says Ghosh.

Many solar biggies in India are eyeing the micro-grid space. They know there is a pot of gold at the bottom of the pyramid but not quite how to get at it.

American company, SunEdison, which is the largest foreign owner of solar power plants in India, has just won a mandate to put up micro-grids in seven villages in Madhya Pradesh (159 KW of capacity) and 54 villages in Andhra Pradesh (241 KW), through the respective State tenders. Here, the systems are subsidised by the government.

Another US-based company, Azure Power, is examining the viability of micro-grid projects with a view to building and operating them (as opposed to selling the systems to local entrepreneurs).

Welspun Energy, India’s largest solar power plant owner, is doing a pilot and intends to scale-up.

For these large companies it would not make sense to get into this low-revenue business unless they do thousands of micro-grids. This means that a lot of funds are set to flow into this business — whether the companies’ own funds or institutional finance facilitated by them.

“If the commercial viability is established it is a good opportunity for micro finance institutions,” says PN Vasudevan, Founder and Managing Director of IFC-backed Equitas Micro Finance Pvt Ltd.

Up till now, solar-micro-grid has mostly been CSR activity. The migration of ‘solar plus micro-grid’ based rural electrification from CSR to commercial space is one of the mega trends in the Indian solar industry today.

(This article was published on July 31, 2014)
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