The future of India’s rural energy is off the grid

More than 1 billion people have yet to switch on a light bulb. Commercially viable solutions to address this enormous problem exist and they all rely on the decentralization of energy delivery and supply.

The centralized grid-based approach to bring power into homes has been, by and large, a failure for most rural areas in developing countries. In India, for example, 400 million people go about their daily lives without electricity. The primary culprits are a lack of infrastructure, high losses in transmission and distribution, and an overall shortage of power – the peak power deficit in India is 13% and growing. The problem is that billions are still being poured into this failed approach. So, in fact, poverty is a system-design failure.

The interesting thing about India is that “electrified”, according to its official definition, means that there are power poles and cables for only 10% of a village. Worse, it doesn’t necessarily mean that there is electricity running inside the cables, which means that even “electrified” rural communities do not have reliable access to electricity.

The dire need for power in rural India was summed up nicely by a recent Economist article:

On paper, plans exist for linking the country’s northern and southern grids. That would help, yet nobody expects rural India to be properly plugged in for a long time yet. Meanwhile, villagers soldier on with paraffin lamps, which harm lungs and emit a dim light that is of little use for school homework. Darkness breeds danger, so women stay home after the sun goes down. A lack of electricity limits business, as markets and shops close early. Banks have been ordered to reach villages, but they need electricity. And though most Indians have mobile phones, many struggle to recharge them. Lots of India’s 400,000 mobile-phone towers are powered at least in part by diesel generators, which are noisy, dirty and costly. Power can account for two-fifths of a mobile-phone company’s operating costs.

However, there is hope. In rural India, entrepreneurs are creating the future of energy, and it has nothing to do with a socket in the wall or the coal-powered electricity grid. Instead, entrepreneurs rely on proven decentralized business models. What they lack is access to capital, which is overwhelmingly skewed towards investments in the traditional, fossil fuel-reliant grid: a grid that hasn’t come for decades and won’t come for decades more.

From product companies Greenlight Planet and d.light that provide solar lanterns, to Selco and Mera Gao building distributed solar power mini grids for lighting, to companies such as my own, OMC Power, building and operating industrial-scale renewable “micropower” plants to power mobile networks and rural communities, rural India has become a lab for innovations.

What all of them have in common is a realization that the grid is broken, and that decentralized power production and distribution is the only way to expand rural electrification to hundreds of millions of people.

The profitable point of entry varies between countries, between states and even between villages. So generation and distribution capacity has to be built with the local demographics in mind, which means that there is no ultimate model to rule them all. What can be said, generally, is that to have a differentiated customer base – for example, providing power to homes and businesses – makes a rural electrification venture more bankable and more sustainable in the long term.

The best analogy for the potential of the micropower industry is what happened with mobile phones in the past 20 years. In 1995, when mobile telephony was launched, India had about 20 million fixed-line phones. Today, mobile phone subscriptions have passed 1 billion and there are just over 30 million landline connections. That’s the power of cutting the cord and going mobile, distributed, decentralized.

The decentralized approach to energy generation and distribution in rural India will eventually have an impact on how we look at energy all over the world – in rural and urban areas. It is very possible, and sooner than we would have imagined, that we will have a power plant close to home, if not on our roof or backyard, then perhaps in the neighbourhood. The era of centralization is ending.

Read the Technology Pioneers 2014 report. 

Author: Pär Almqvist is Chief Marketing Officer at OMC Power, a World Economic Forum Technology Pioneer company.

Image: Vendors use solar powered lights at an open evening market in India REUTERS/Amit Dave.