Q&A: Rockefeller and Tata want to replace India's diesel generators

A drone captures aerial photos of a mini-grid in the state of Bihar that serves the village of Parsa, built as part of The Rockefeller Foundation's Smart Power India program. Photo by: Rockefeller Foundation

WASHINGTON — Last week, The Rockefeller Foundation and Tata Power announced a major new energy initiative, which they hope will see 10,000 microgrid systems deployed in India by 2026.

The joint venture involves setting up a new company, TP Renewable Microgrid Ltd., which could become the world’s largest microgrid developer and operator. The organizations behind the new venture believe it could serve as a model for scaling up microgrid power systems around the world in markets where the central power grid fails to provide reliable energy access.

“So we see still an enormous role for distributed energy to come in and in particular to supply critical energy for businesses ... where the question of reliability is so important.”

— Ashvin Dayal, vice president of power, The Rockefeller Foundation

“As Rockefeller Foundation, we're absolutely going to be doing more work of this sort in other markets and particularly in several countries in Africa,” Ashvin Dayal, vice president of power at The Rockefeller Foundation, said in an interview.

Dayal added that many parts of Africa offer an even stronger investment case for minigrid energy systems, given the relative lack of penetration by the central grid into rural areas.

“The challenges are also that much greater because of market readiness. But that's definitely going to be a big priority for us after this deal,” Dayal said.

Devex spoke to Dayal about the new joint venture and about how the market for minigrid energy systems is evolving.

This conversation has been edited for clarity and length.

Can you describe the business model behind this new initiative? What is the function of this company that The Rockefeller Foundation and Tata Power are creating?

They are going to essentially operate as a private rural utility, centered on using minigrid technology as a way of supplying power to customers who are either unserved or highly underserved by traditional grid infrastructure. In India, below a certain scale, the minigrid sector is free to operate and compete with the grid in areas where service is understood to be erratic, intermittent, or where reliability is poor, or where the grid is simply not present.

Now, India has obviously over the last five years made enormous progress in grid extension, getting to, by their calculation, 100% [connection at the village level]. But the government itself accepts there are still close to 100 million people who are not individually connected, who, even though there may be a grid lane close by, they're not connected, and even if they were, the quality and reliability is very low.

So we see still an enormous role for distributed energy to come in and in particular to supply critical energy for businesses, micro-enterprises, for economic activity, where the question of reliability is so important. If you're running a small business, if you have a small milling machine or a carpentry workshop or you're running an agricultural farm or you have refrigeration because you have a small shop, you can't accept unpredictable, sometimes lengthy outages because that's just extremely detrimental to your business. So people end up using a lot of diesel because they want that guarantee.

So would you say the intention is not so much to deploy minigrids to compete with the central grid, but more to fill the role that generators, for example, are currently playing as supplements to the central grid?

Energy is such a disaggregated sector in India. People get their energy from so many different sources. What you're providing is a value proposition that is truly going to have a positive livelihood impact.

I do think there's potential for more collaboration with distribution companies. You have a lot of state-owned utilities in India that are frankly struggling to supply in rural areas because they don't have a sort of customer-centric orientation. They're not able to innovate and bring in some of the newer technologies that actually some of the minigrid companies have been pioneering — metering, billing, and collection methods, using smart meters, things like that — and also understanding the local market, being able to look at how micro-enterprises can be promoted and stimulated alongside. Traditional state-owned utilities struggle with that.

The goal is to deploy 10,000 minigrids by 2026. Based on the market analysis you've done, what do you know about the likely customers for those energy systems?

I think that there's quite a high likelihood that, in a reasonable proportion of places, people will have access to both [minigrids and the central grid] but in different ways and for different needs. Most low-income customers will accept some fluctuating or irregular supply in a home, because it's maybe, you know, powering a few lights or a mobile charger, and it's a little less time-sensitive. But they won't accept it for their business, outside for their pump, or for their enterprise.

What you see right now in rural Bihar, for example — we did a large sample survey late last year, and we found that about 45% of rural enterprises, even though the grid is potentially available, they're not connecting and they are relying on alternative sources. So there's still a large market where you could imagine there would be the grid and a Tata minigrid operating in a common area, but serving quite a different segment of the market.

I had previously been under the impression that minigrids were more likely to serve household energy consumers than businesses, but it sounds like you're saying the opposite.

Yeah, I am, actually. That's, I think, one of the really interesting evolutions of the minigrid sector in India in general, not just with this project. Because, as you know, minigrid power is more expensive than grid power — significantly more expensive. And even though this project is going to be some of the cheapest minigrid power anywhere in the world, it's still more expensive than the grid. People make very rational choices. They will consume expensive power relative to the grid as long as it's very reliable and cheaper than diesel. And that's what this is. This is going to be significantly cheaper than diesel but more expensive than the grid.

In our modeling, in our surveys and estimations of market, we have actually found that the predominant market for this business will, in fact, be small enterprises and local entrepreneurs in the area, because that reliability question is actually turning out to be a far more important factor than perhaps we had previously understood. And you're absolutely right — three years ago, four years ago, when we were first looking at this with the first wave of smaller minigrid companies, our big worry was that they would only supply the home and actually wouldn't focus enough on productive-use electrification. In fact, now we think it's actually the opposite trend, is what we're seeing.

About the author

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    Michael Igoe

    Michael Igoe is a Senior Reporter with Devex, based in Washington, D.C. He covers U.S. foreign aid, global health, climate change, and development finance. Prior to joining Devex, Michael researched water management and climate change adaptation in post-Soviet Central Asia, where he also wrote for EurasiaNet. Michael earned his bachelor's degree from Bowdoin College, where he majored in Russian, and his master’s degree from the University of Montana, where he studied international conservation and development.