Local power

Two recent, unrelated news reports together highlight the problem in energizing rural India as well as a solution. The first report tells us that the government’s plan to electrify every village in the country by 2009 is falling quite short of targets. The second is about a solar-powered IT knowledge centre in rural Gurgaon set up by Teri (The Energy Research Institute at New Delhi). This centre, which will provide clean and reliable power solutions for a range of rural needs, sets an example that can be applied to power-using enterprise such as banking, health clinics, water purification, etc.

The government’s inefficiency in handling its rural power scheme is evident in the reported cost overruns due to shortage of contractors and equipment. But that’s just a symptom.

The real malaise is poor recovery of costs—because of huge transmission and distribution losses (including illegal diversion of power supplies) and serious limitations in collection of user charges, largely on account of populist politics. Indeed, in some of the Bimaru (Bihar, Madhya Pradesh, Rajasthan, Uttar Pradesh) states, the government is actually attempting re-electrification of villages due to the theft of assets used in power transmission.

What all this means is little incentive for private participation and greater “reliance" on government provision. The outcome: 56.5% of our rural households—including a major share in the Bimaru states—remain without electricity till date.

Not only is connecting a large number of villages to the national grid—the backbone forming transmission wires spanning the country—proving to be too costly, but the quality of that link is suspect as well. Which is why it is often argued that farmers would prefer regularity (predictability, rather) of power for their irrigation pump sets to free power that’s mostly missing.

The cost problem with connecting rural areas exists in other developing countries, for example in Africa, too. Many of these are increasingly admitting to the benefits of decentralized generation of electricity in small-to-medium-sized facilities that are located near the sites of demand. Within distributed generation, it is the renewable energy options geared to local resource availability that are proving successful. Solar, wind, biomass... the range is wide and flexible.

This approach has also been seen in India, but remains ad hoc in coverage. Several relatively unknown, initiatives have shown how this is the most viable solution for not just generating power, but also opportunities for entrepreneurship and livelihoods—involving local youth and women in self-help groups for managing and servicing such installations.

Unfortunately, the government barely accepts the potential in off-grid systems, even as its achievements in grid-based renewable energy are a small fraction of the recognized potential. The role of non-government bodies and private action is, therefore, crucial. Teri’s new centre is a small example of how rural communities can be empowered. There are many more —but, not at the scale needed. For that to happen and sustain, one major constraint—of financing such projects—has to be resolved. Banks do tend to steer clear here.

Enter innovative solutions, again. Microfinance is one. Also, while assessing projects for financing, both for households and small businesses, it is important to consider enhanced earning capacities that would be the project’s outcome. In terms of cost recovery, this makes it attractive for both lenders and investors.

Is off-grid renewable energy a viable solution? Write to us at views@livemint.com