Scaling reliable electricity access in India: A public-private partnership model

Abstract

In this paper, we have examined scaling reliable electricity access in India from two perspectives. First, given past policies, we examine the ability of mini grids to achieve profitability at the unit level as well as potential for scaling. We find that many mini grid developers have shown profitable unit economics and are getting ready to scale; however, they face increased challenges given India's success with 100% electrification. Second, given the experience gained by mini grid operators, we explore collaborative business models that would allow for win-win situations going forward for both distribution utilities and private operators. We use a modification of the existing distribution franchisee model to allow the mini grids operations to manage not only metering and billing but also operation and maintenance as well as generation. We show that it is possible to create business models that not only are appealing from a financial perspective – i.e., in not only improving distribution utility margins but also in meeting private operator criteria of 12% internal rate of return – but also meet multiple policy objectives such as provision of 24-hour electricity reliably and meeting renewable power obligations. However, we also show that the eventual success of these models would critically depend on the distribution utilities and mini grid operators agreeing on elements of these business models, in particular equitable sharing of roles and responsibilities around generation, distribution, operations and maintenance, metering and billing, as well as financial value.