There are various policy provisions in existence that encourage and enable the use of renewable energy sources for rural electrification. For instance, The Electricity Act 2003 Section 4 allows the central government to formulate policies for stand-alone systems for rural electrification using renewable energy. The National Electricity Policy also has provisions regarding renewable energy sources and rural electrification. The Rural Electrification Policy suggests using off-grid stand-alone systems where grid connectivity is financially unfeasible or cost ineffective. These efforts made by the government have set up institutional support systems and methods to tap renewable sources such as wind, solar and biomass as sources of energy. However with only 55% of rural households being electrified and 70% of that electricity being generated from coal based power plants; a large number of people still lack access to clean and reliable energy.

The past policies and programmes have not made an impact due to several fundamental structural problems:

1. Government’s insistence on expanding the centralised grid to remote locations: Expanding the existing grid involves huge expenditure on infrastructure, high transmission and distribution losses and unreliable power supply. Decentralised Renewable Energy (DRE) micro-grids work out to be more cost effective in areas with difficult terrain and dense population of households. One could argue that the lack of reliable power from a central grid would push for development of clean energy in rural areas, but subsidised carbon based fuels like kerosene and diesel are still being used at the consumer end for home lighting.

2. All though integrated mini-grid-centralised-grid planning is a good option, operators and investors do not necessarily view mini-grids as a viable long term option: In reality, integration would be mutually beneficial where the local DRE systems can feed electricity into the central grid supporting voltages at the end of the distribution lines, serve local customers in the event of a central grid failure and ensure reliable supply. The Decentralised Distribution Generation (DDG) scheme recommends that mini-grid plans be grid ready to be capable of exporting and importing power from the central grid. However, operational details are yet to be worked out. Better policy and financial incentives need to be provided to mini-grid operators to interact with the central grid.

3. While guidelines exist, there is no mechanism to ensure adherence, and in many projects the tariffs are higher than the amount required to cover the cost of generation: The Remote Village Electrification Programme of the Ministry of New and Renewable Energy (MNRE) states that consumer tariffs for DRE electrification projects should be similar to those electrified through the grid and the Decentralised Distribution Generation (DDG) guidelines state that the tariffs should be similar to existing tariffs in neighbouring areas. The need is observed for regulation in the DRE space through a policy regulatory mechanism to spread out costs over all grid-connected consumers. Owing to their large numbers, the incremental cost to individual grid-connected consumers will be negligible but the economic viability gap of the DRE projects will be addressed. Another option is through budgetary allocation by the government. A new sustainable business model to deal with this problem called the ‘Off-Grid Distributed Generation based Distribution Franchise Model’ (OGDGBF) will be detailed in the subsequent energy policy articles.

4. Definition of ‘electrified’ is found lacking with specifications: For instance an entire village qualifies to be electrified if only 10% of the households in a village are electrified. Short changed definitions such as these have made the total count of un-electrified villages less than before. This combined with the unreliability of data and lack of feasibility studies before the RGGVY scheme was started actually gave incorrect numbers and statistics while the scheme was being formulated. Data from the 2001 census did not account for growth in the rural population/habitats/villages. So the actual count of un-electrified villages is much higher, indicating that there are still some villages unaccounted for. On the other hand, there are villages that show duplicity in rural electrification efforts. These villages were seen to have the infrastructure laid under the RGGVY scheme, DRE micro-grid network and a state-run electrification scheme, all at the same location.

5. An important policy gap in India is to have capital based subsidies rather than result based incentives: For instance, out of the 67 projects sanctioned under the MNRE’s Village Energy Security Programme, only 51% were actually operational. The mediocre performance was primarily due to the ineffective-ness of implementation by the state nodal agencies. Since decision making remains centralised, there were delays in sanctioning projects which then trickled down to the state nodal agencies. Such top-down approaches have ended up focusing on intention, rather than performance. A change in monitoring metrics from ‘outputs intended’ to ‘performance generated’ would ensure the effective operation of such projects.

6. Access to credit is limited and investors do not feel the confidence to invest at this point: Policy plays an important role in making finance and credit available for both DRE developers as well as DRE consumers. However, lack of innovative service delivery models coupled with lack of access to credit makes the private and public entities disinterested in investing. This results in a negative feedback cycle.

7. Current renewable power purchase obligation (RPO) regime covers only grid-based plants: To encourage the use of energy from renewable sources, Government of India has evolved Renewable Energy Certificate (REC) mechanisms for RE based generation companies to sell electricity to local distributers at the same rates as conventional power. They recover the balance cost by selling certificates to other distribution companies and obligated entities by enabling the latter to meet their renewable power purchase obligations (RPOs). There is a need for these regulations to be evolved to accommodate off-grid renewable energy generation into the existing REC mechanism taking into account the large number of off-grid projects across the country.

There are examples from the states of Bihar and Uttar Pradesh, where the Decentralised Distribution Generation (DDG) projects have been successful. The villages in these states show common indicative demand for support systems to develop the village economy through reliable quality electricity supply for irrigation and micro-enterprises.

Clearly the demand for such DRE projects exist. However at this point, large scale deployment seems unfeasible due to several policy gaps and inadequate support for implementation. There needs to be continual support mechanisms put in place, as well as constant involvement of all the stakeholders - central/state governments, village committees, civil society groups, Panchayati Raj institutions and developers to realise the goal of electrification for all’. q

1. Gambhir, A., Toro, V., and Ganapathy M. (2012). Decentralized Renewable Energy (DRE) Micro-grids in India. Prayas Report, Pune.

2. Comptroller and Auditor General of India (CAG). (2014). CAG Union Performance Audit Report on Rajiv Gandhi Grameen Vidyutikaran Yojana Presented. New Delhi.

3. Rajiv Gandhi GrameenVidyutikaran Yojana (RGGVY) Annual Report. (2013). URL: http://rggvy.gov.in/rggvy/ rggvyportal /index.html.

4. Ministry of New and Renewable Energy (MNRE), Government of India. (2011). Strategic Plan for New and Renewable Energy Sector for the period 2011- 2017.

5. Udupa, A et al. (2011). An Inside View of the RGGVY. Greenpeace India Society Social Audit Report. URL: http://www.greenpeace.org/india/Global/india/report/RGGVY%20national %20report.pdf.