NSEFI Hon'ble DG for the National Workshop on Mobilizing Finance for Renewable Energy
Feb 25, 2025
Hon Union Ministers, Distinguished members on and off the dais, colleagues. Thank you for inviting me.
In his address the union minister about the importance of decentralised solar and kusum and the need for new ideas. This is the context for what I have to say.
Ever since I was Secretary MNRE, and particularly in the last two years, and with many field visits, I have been trying to understand, and promote, distributed RE. Before we go into the nuts and bolts of financing distributed RE let us see its revolutionary potential, much of which our banker colleagues may not be familiar with. Then we will find the solutions. I seek 5 minutes of your time. and will mention just 5 figures.
First, Doing 1000 GW decentralised solar by 2050 through 1-5 MW plants around rural distribution stations will save, can you believe, Rs 15 lakh thousand crore in interstate transmission infrastructure as per expert opinion. It will also ensure each state becomes its own producer of RE and meet its RPO, a point repeatedly emphasised in meetings, not through transfer but by own production. Secretary Financial Services had mentioned in his speech, what is well known, about the two big risks of solar projects - land acquisition and transmission. Both will simply go away. The issue of impact of cloud cover or extreme weather events has not been much talked about but must be. Decentralised almost completely neutralises that risk. It is also axiomatic that transmission losses will greatly decline and power would be available in the hinterland to promote economic activities. What then could be better?
Second, these plants can be ground mounted which means land is lost to agriculture forever, and the total size could be 20 lakh acres or more. Alternatively, we can do agri voltaics which requires 75 lakhs per MW more as capital cost but while saving the land in perpetuity for agriculture, will ensure even better cropping, especially as the heat increases. Since lease rent or crops will be extra it will ensure 10 lakh farmers earn more than rupees one lakh annually at current prices and it will generate local employment of 5 per plant. Let this be treated as rural roof top. The total subsidy available under the urban roof top programme, if available for this, could create a capacity of 100 GW. Besides these will unleash a wave of small entrepreneurship.
Third, It is well understood that the cost of supply increases as we have to supply to far off areas. There are different estimates but if the cost of rural supply is Rs 7 + and average tariff is about Rs 4.75, there will be rs 2 saving and discom will save several hundred crore per year considering only rural domestic demand. Later, these plants can have storage systems to provide power round the clock.
Fourth, RBI has recently brought out a Report expressing great concern at discom losses which has become a serious threat to state finances. There are many issues involved but the problem is not going away in spite of several schemes. No wonder because the real issue is free electricity for irrigation. The demand for this is projected to be 300 billion units by 2030. So losses will be Rs 7 into 300 billion or about Rs 2 lakh crore per annum. If we solarise feeders by replacing electric pumps with solar, which even World Bank has recommended, most of these losses will vanish while farmers will earn income by supplying electricity to discom and will conserve fast depleting water. This will not happen with decentralised plants as is being done in Maharashtra and some other states.
Fifth, We have 80 million milk producing households. If we have 20 lakh household bio gas plants (only 25%) with 20000 thousand small slurry plants to convert slurry to bio fertiliser, they will replace annually 240 lakh LPG cylinders. A one time subsidy of about 5000 cr will save annually on import of this gas, Rs 720 cr of government subsidy for it and about Rs 4000 cr of fertiliser subsidy apart from reducing almost a million tonnes of CO2 equivalent methane.
These are mind boggling figures. Either I will fail in mathematics or we must ensure this for our deployment strategy. This is not just about clean energy but constitutes a sustainable development strategy. And I have not even talked about the deployment of solar pumps in off grid mode and the need to do saturate processing of urban and rural waste and sewage and how to provide industrial process heat.
Allow me to tell u a little story. When I was in my second district way back in 1987, I was challenged to rehabilitate 56 bonded labour families freed by the Supreme Court from MP but who had become bonded again in our stone quarries. We made them owners but the bank initially refused to finance an innovative package because the normal rules did not allow but they finally got around almost on my guarantee. The project was a complete success and a trail blazer.
That was very small while the issues I have raised are very big but principles are the same. We must make sure we have an innovative and enabling policy, devise suitable implementation methodologies and new need based financial instruments. Those are the challenges to meet, and they brook no delay. I would recommend setting up of panels to come out in detail, with the nuts and bolts, on the way forward and road map, and do so urgently.
