Powering rural micro-entrepreneurship with reliable energy access


June 4, 2021, 10:07 PM IST Jaideep Mukherjee and Nidhi Sarin in VoicesIndia, TOI

Off-grid clean energy access has vast potential to create a flourishing microcosm for sustainable development in India. For a country with 70 percent of its population living in rural areas, Micro-Entrepreneurship Development (MED) will essentially help it realise its full economic potential.

What’s encouraging is that the unserved rural areas have taken a leap of faith in off-grid energy solutions. Awareness about solar lanterns, solar home systems, and decentralised renewable energy is rising in regions that face economic challenges due to disruption in access to grid electricity. The additional benefit is that the off-grid power has a shorter cycle time to set up accessibility and recover the cost. Non-grid electricity is also considered flexible and resilient as it can offer seamless quality power to consumers as per their evolving energy requirement in the catchment area.

The focus on micro-entrepreneurship development will positively impact local communities and result in livelihood creation and sustainable economic development. More than half of the population lacking reliable energy access lives in Uttar Pradesh, Bihar, Odisha, West Bengal, and Madhya Pradesh. The direct corollary of micro-entrepreneurship development will be an expansion of distributed energy resources, simultaneously contributing to meeting the country’s renewable energy target of 175 GW by 2022 and 450 GW by 2030.

According to the 73rd round of the National Sample Survey (NSS), there are 3.2 crore micro-entrepreneurs in rural India. However, lack of infrastructure and financial support is seen as a hindrance to their robust development. Reliable energy access encourages micro-enterprises to opt for off-grid resources like micro or mini-grids. Despite the higher cost of electricity vis-a-vis centralised grid electricity, these micro-entrepreneurs choose service reliability and customer satisfaction over the perception of affordability.

Last year, a study that involved 10,000 rural households and 2,000 rural enterprises across Bihar, Uttar Pradesh, Odisha, and Rajasthan, highlighted that over 80 per cent of mini-grid users expressed satisfaction with their connections despite citing affordability challenges.

All about rural entrepreneurship

Rural entrepreneurship in the past only referred to agriculture-related activities. Despite the reliable and quality energy access through non-grid resources, the definition of rural micro-enterprises largely remained limited to the retail trade. Although, around two-third of the non-farm enterprises in rural areas still engage in retail trade in grocery, hardware, food or other fast-moving consumer goods. Micro-entrepreneurship in production and manufacturing activities, or service-based or skill-based enterprises has started taking root. Occupations like tailoring, personal beauty care services, blacksmithing, pottery, weaving, carpentry, mobile repairs, cybercafés etc. have started growing.

In a nation with agriculture as the dominant source of livelihood, solar pumps, flour mills, dairy, warehouses, and cold storage etc can be income-generating vocations.

Low demand for off-grid electricity

It has been observed that while the awareness on sourcing of green electricity from non-grid sources is rising, the overall demand for electricity remains low. A significant number of enterprises engaging in activities such as repair services and tailoring choose to remain outside the grid. Despite the proximity to the centralised grid, they remain unserved due to economic constraints. Such enterprises continue to operate at a very small scale and rely on kerosene or solar lanterns.

Tapping latent demand for electricity in rural India

Some businesses, who choose to stay outside the periphery of energy access, meet their energy demand through fossil fuels like diesel and kerosene. In situations when subsidised fuel is unavailable to meet lighting needs or power high wattage motor loads, such enterprises willingly switch over to cleaner electricity sources. Energy service companies need to generate awareness about the benefits of medium to high-power appliances, or weave in affordability, efficiency and convenience factors in customer service and make electricity attractive to consumers and tap the latent demand.

As long as there is continuous innovation there cannot be a dearth of creative solutions to beat the challenges in energy access and tapping the latent demand. Creating integrated energy systems with private sector micro or mini-grids and public sector grid or setting up micro-franchisees can resolve the issue of quality and access and benefit millions in rural areas. One such example is the model distribution zone that Smart Power India set up in association with the Odisha public utility in 2020. The model demonstrated how micro-franchisees can go a long way in creating reliable energy access and improving customer service.

Scaling up sustainable energy solutions

Innovation needs to take centre stage not just in the deployment of energy access but lending scale and size to it. For example, Melinda Foundation, a non-governmental organisation (NGO), has shown how off-grid electricity can not only turn the tide around in energy poverty but result in overall community development. The NGO runs 49 mini-grids and electrifies 50 villages in Jharkhand. As of 2020, it has recorded a 23 per cent increase in household incomes, a 7.3 per cent rise in GDP per capita, and a 28 per cent increase in village enterprise revenue since the deployment of its projects in the region in 2018. GIZ India is also implementing the Indo-German Energy Programme (IGEN) in partnership with local Indian partners and focusing on sustainable and inclusive development solutions that meet local needs.

The immense potential of off-grid solar has even warmed up private capital owners and corporates to the idea of investing in decentralised renewable energy (DRE) projects in rural areas and encouraging entrepreneurship. The partnership between Tata Power and Rockefeller Foundation plans to install 10,000 microgrids by 2026. The ambitious project aims to support 100,000 rural enterprises, create 10,000 and support the irrigation needs of 400,000 farmers.

The symbiotic relationship between energy service companies and enterprises

Off-grid solar players have innovated business models to drive energy demand by handholding and enabling local enterprises to scale up. The business model encourages trust-building between enterprises and energy service companies by understanding their energy needs, and offering reliable solutions for business growth.

As local business owners achieve scale in operations, it results in greater energy demand and increased economic activity in the area. The mentoring by off-grid solar companies helps in modernising and expanding operations by enabling marketing linkages, entrepreneurial skills training. They can even help in accessing credit to adopt advanced technology and shift from manual operations to the motor-run tool or retrofit fossil-fuel run appliances with energy-efficient green appliances.

The mentoring results in many benefits for enterprises such as an uptick in productivity by as much as 50 per cent, expansion in business and rise in household income, and even more, livelihood options for the local community. Then energy companies also reap benefits in terms of securing increased and stable demand for their power.

The need to push microenterprise development in rural India will become a key role in helping the economy recover from the pandemic led economic crisis. The awareness about reliable energy access among rural enterprises and their relationship of trust with off-grid energy service companies need a greater push like never before.