The goal of this report is to inform investors about the potential of solar minigrid technologies to serve India’s rural market. India, a rapidly emerging economy with the world’s second largest population, is facing a surging energy demand. A large portion of India’s rural population, which represents 60% of the total population, does not have access to reliable electricity or has limited access and relies heavily on fuels such as wood, diesel, and kerosene to fulfill energy needs.
Using the most recent available expenditure data, it is estimated that India’s rural consumers currently spend US$4.86 billion (INR 243 billion) per year on energy. Because of the linkages between reliable electricity supply, gross domestic product growth, and living standards, the Indian government is accelerating the deployment of electricity to India’s rural population.
In January 2010, India’s Ministry of New and Renewable Energy (MNRE) under the Jawaharlal Nehru National Solar Mission (JNNSM) announced the goal of deploying 20 gigawatts (GW) of grid-connected solar power and 2 GW of off-grid solar by 2022. Their objective is to invest in India’s vast solar resources by deploying solar energy on a broad scale and extending modern power services to millions. Specifically, the JNNSM in Phase I of the mission has set the goal of implementing 1 GW of grid-connected solar and 200 megawatts (MW) of off-grid solar power (rural village electrification) by March 2013. By providing many incentives for renewable energy projects, including capital subsidies of up to 90%, tax holidays, and low-interest loans, the government is hoping to spur clean energy development in key areas.
India’s electricity demand is expected to increase from 900 billion kilowatt-hours (kWh) to 1,400 billion kWh by March 2017. To meet this demand, India’s power sector overall will need an investment of US$300 billion to US$400 billion during the five-year economic plan that started April 2012 and ends March 2017 to meet its generation targets.
MNRE’s target of installing 1,100 MW of solar minigrid capacity in the next five years will require public and private sector investments of roughly $US4.4 billion.