India faces a dual challenge of meeting surging energy demands while combating a climate crisis it’s already feeling acutely. Record-breaking heat waves during its recent election underscored the urgency of leveraging renewable energy to achieve sustainable economic growth.
While investors predict that rural energy and infrastructure initiatives will be a priority for the new coalition government, recent history suggests that the government could extend or develop additional coal plants, from which India produces the majority of its power.
Distributed renewables offer a unique and fast green growth opportunity for India – and other emerging economies – because they bypass the logistical complications and expenses of expanding the conventional grid. What’s promising is that a new wave of social impact and cleantech startups is delivering a jump in capabilities and value creation to accelerate off-grid clean energy adoption.
Off-grid solar evolution
India’s Council on Energy, Environment and Water estimates that more than 2,200 gigawatts of solar and wind capacity is needed by 2050 for India to reach its goal of net-zero emissions by 2070. Fortunately, renewables already enjoy positive momentum in India. Solar capacity has surpassed 50 gigawatts.
The major challenge now is affordable access: the generation cost of this mostly utility-scale solar puts the price of electricity out of reach for many.
Off-grid solar deployments in Asia and Africa – mostly through small solar home systems for lighting and phone charging – has brought first-time energy access to half a billion people in the past two decades. One noticeable evolution is energy startups that are helping customers move up the value chain, using abundant and affordable renewable energy sources to power livelihoods and new business opportunities.
India is at the forefront of this “productive use of energy” sector. The ecosystem includes a diverse range of appliances such as solar-powered refrigerators, smart devices for farm management, and e-mobility. Hyderabad-based Mowo Fleet offers electric two- and three-wheel vehicles for female transport and delivery drivers. Aurangabad-based S4S Technologies is helping reduce food waste and generate income for farmers with solar-powered food processing; it recently won the Earthshot Prize for pioneering environmental impact. Kisangas in Pune provides biogas technology that converts cattle dung into high-volume methane for commercial resale. Ecozen, also in Pune, offers solar-powered cold storage; it raised almost $30 million last year from US-based investment manager Nuveen and other investors.
What companies focused on productive use of energy have in common is a commitment to developing technology that empowers low-income individuals to generate income, start businesses and protect their livelihoods from climate change.
Flexible finance for off-grid acceleration
We’re at the beginning of an economic and climate revolution in India that could transform how we deliver and use energy. Significant barriers to scale remain, particularly in financing and technical support for off-grid energy adoption, finds a recent study from Acumen. Most commercial funders, for example, are cautious and are waiting for further business model and market validation.
Reaching and customizing clean energy solutions for dispersed and low-income communities requires partnerships, creativity and patience.
The public sector will be a critical player if energy companies are to overcome these barriers. The Indian government is supporting productive use of energy with targeted subsidies that make off-grid energy products more affordable and accessible, and by fostering partnerships across agencies and ministries. To fully unlock this market’s potential, the government must help establish standards and certifications to enhance the credibility of these innovative products.
Additionally, strengthening partnerships between enterprises and the national and state-level rural livelihood schemes, such as India’s National Rural Livelihood Missions, can help businesses reach last-mile customers, scale operations, and attract much needed investment capital.
It would be a mistake to rely on fossil fuels to address economic and especially rural development. Thanks to innovation and falling prices in renewables, India does not have to choose between economic growth and climate action. We can deliver energy and lift people out of poverty without harming the environment and set a global standard for climate action by prioritizing off-grid renewable solutions, we can empower millions, stimulate economic growth.
Mahesh Yagnaraman is Acumen’s India country director.
