Tata Power today announced a new business in partnership with the Rockefeller Foundation under which it will set up micro-grids based on renewable power and manage electricity supply in rural areas. It has formed a new company, TP Renewable Microgrid Ltd, which will target 10,000 micro-grids across India.
In the first phase, some 200 villages have been identified in Uttar Pradesh, Bihar and some parts of c, Praveer Sinha, chief executive officer, Tata Power told Business Standard.
TP Renewable Microgrid Ltd will be managed by Tata Power, which has 11,000 Mw of installed grid-scale generation capacity and over 2.6 million customers under management across Delhi, Ajmer and Mumbai distribution areas.
With this, it would be going whole hog into distributed energy generation and management business, after having adopted this model on a smaller scale through a joint venture with the Delhi government for slum communities.
A micro grid is a localised system of power generation and distribution as distinct from grid power, which is generated and transported over large distances.
Giving the reason for venturing into rural electricity market, Sinha said Tata Power was formed with the aim of supplying clean, abundant and affordable power. “The paradigm shifted to Mumbai where we supplied power. Now, this is the leadership (which) Tata Power will have to demonstrate and if 25 million people have to be impacted, it has to be Tata Power,” he added.
The Rockefeller Foundation’s division Smart Power India (SPI), which already works with local energy supply companies, would be partnering Tata Power. “Our experience with SPI shows that when people buy power from micro-grids, they value it and like the quality of power. When people purchase power, their income increases considerably,” said Rajiv J Shah, President, The Rockefeller Foundation.
Shah said his foundation intended to be an equity partner going forward. The Rockefeller Foundation was also in talks with international funding agencies for bringing in commercial financing.
On how difficult would it be to scale up the micro-grid business because of the competing grid supply, Shah said, “The entire strategy is to have the right partner and Tata Power is absolutely the right partner, which brings a level of scale and sophistication that facilitates bringing down the price considerably. We believe it will be on par with grid power and it is not just about the price, but also quality and reliability, which is not being met by grid power.
According to Sinha, the endeavour was to build the whole ecosystem so this is not just about supplying power but also supporting micro-enterprises, financing and insurance and marketing. “Between the Smart Power Initiative and Tata Power, we will be creating an end-to-end solution of creating economic activity as well as supplying power,” he said.
At present, nearly a million people do not have access to affordable power supply despite the government programme for rural electrification, said the two partners. According to Shah, this data is also an underestimation.
TP Renewable Microgrid Ltd will provide clean power to about 5 million households, directly impacting the lives of 25 million people over the next decade. The programme will run parallel to the Government of India’s ongoing campaign to provide electricity to rural areas.
Sinha, however, said, “It has to be business. This scale will only be achieved if it is commercially viable.” They would be looking for a minimum mass of 400 houses to offer micro-grid solutions in a village. “It should be a sustainable scale for the micro-enterprises that we will be supporting.” SPI will do the micro-enterprise part, while TP Renewable will set up the grid and manage distribution and collection of power tariff.
According to the two partners, rural businesses and households continued to rely on alternative sources to power daily needs—with over 40 per cent of rural enterprises in states like Bihar and Uttar Pradesh relying on non-grid sources of power such as diesel.