February 18, 2015: A new report from The Climate Group, produced in partnership with Goldman Sachs Center for Environmental Markets, was launched today at RE INVEST 2015, showing both how businesses can invest and support the renewable energy sector in India, and the added environmental and social benefits that this can bring.
The report, The Business Case for Off-Grid Energy in India, unveiled in New Delhi, looks at innovative business models in the off -grid energy sector that have the greatest potential to achieve scale. By identifying models that can meet future capacity demands and providing recommendations on how to address key challenges to scalability, the report aims to facilitate greater private sector engagement and investments.
Krishnan Pallassana, India executive director, The Climate Group, said, “India has embarked on an ambitious low carbon growth path wherein energy access forms the crux of equitable socio – economic development. Harnessing solar power gives people the unique opportunity to enhance their productivity and thus living standards. This report aims to inform investors on the viable and scalable business models in the off -grid solar energy sector whilst showing that India can achieve the energy revolution it’s aiming for – and crucially that the use of decentralized energy solutions can do so affordably.”
Today in India, around 360 million people – about 77 million households – lack adequate access to grid-electricity. The report shows that decentralized renewable energy businesses already serve close to 100,000 households, with an expected rapid growth of 60-70 per cent annually to 900,000 by 2018. The decentralized renewable energy market segment alone is projected to be worth at least US$150 million by 2018.
Speaking on the need for the report, Kyung-Ah Park, head of the Environmental Markets Group at Goldman Sachs, said, “This report highlights the market opportunity for off-grid renewable energy in India to complement on-grid solutions in making clean and equitable energy access a reality. By working together with the public sector, the private sector can play an important role in deploying innovative financing mechanisms to expand decentralized renewable energy solutions to under-served rural communities in India.”
The Business Case for Off-Grid Energy in India offers several recommendations on the types of investments that are needed, championing them as the potential catalyst for this sustainable growth; all of which encourages and supports entrepreneurial and innovative activity in off-grid energy.
The report is expected to help inform key barriers for investment and ways for potentially innovative financing mechanisms to catalyze private sector capital to off-grid renewable energy and to support the Indian Government’s goals of 100 gigawatts of solar energy by 2022. While off-grid technologies, such as solar lanterns, are affordable and address customer needs of today, the report suggests they cannot meet those evolving and ever growing demands of rural consumers beyond basic lighting.
The report highlights the technologies available, key companies, future growth forecasts and potential for social and environmental impact. Key observations include:
- Market size of the DRE sector will be US$150 million by 2018 largely driven by B2B revenues, and we conservatively estimate the market size for SHSs to grow 60 per cent per year to reach a market size of US$200-250 million by 2018
- With financing support, we estimate 7.2 million under-electrified households will be able to afford a solar home system by 2018
- DRE companies are exploring new types of technology to increase operational efficiency. For commercial viability, it is crucial that DRE enterprises have substantial cash flows that can recover high upfront installation costs
Along with governmental policy focus, there is a clear need for greater private sector involvement in renewables in the off-grid space – and investment is already growing