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The unmet demand for electricity in India presents a huge opportunity for off-grid renewable energy solutions, in particular solar home systems and decentralised renewable energy systems.

A recently published study by The Climate Group in partnership with Goldman Sachs Center for Environmental Markets expects the market size of the DRE sector in the country to reach $150 million by 2018, largely driven by B2B revenues. The market size for SHSs is estimated to grow 60 per cent annually reaching $200-250 million by 2018, it says, adding that nearly five million SHSs will be sold between 2014 and 2018.

SHSs are installed on houses and use photovoltaic cells to provide power to homes located far away from the main grid. DRE systems produce power from renewable energy closer to where it will be used rather than through the utility grid.

The study titled ‘The Business Case for Off-Grid Energy in India’ aims to boost entrepreneurial activity and increase private sector investment in the renewable off-grid energy sector.

At present, approximately 360 million Indians lack adequate access to grid-electricity and another 20 million households receive less than four hours of electricity per day. Though grid connectivity in the country is expected to improve over the next 10 years, 70-75 million households will still lack access to grid electricity by 2024 at the current rate of grid expansion, urbanisation and population growth.

According to the study, India will require energy investment totalling $250 billion over the next five years in order to keep up with the population growth and expand access to off-grid households. Out of the total investment requirement, $100 billion needs to be invested in renewables with 90 per cent investment growth from the private sector, it points out.

The study estimates that with financing support 7.2 million under-electrified households in the country will be able to afford a SHS by 2018. In 2014, approximately 518,000 SHS units were sold and the total number of households using SHSs stood at 900,000. At present, there are over 40 established players in the SHS market but most of them sell less than 5,000 units in a year.

The off-grid DRE enterprises serve 100,000 households as of today. Out of the 40 key DRE players, most are reliant on subsidies and grant. The DRE companies are currently exploring new types of technology to increase operational efficiency. For commercial viability, it is crucial for DRE companies to have substantial cash flows that can recover the high upfront installation costs.

The study identifies the promising off-grid energy business models in India and also highlights the off-grid renewable energy technologies available, key companies, future growth forecasts and potential for social and environmental impact. It seeks greater private sector involvement in the renewable off-grid energy sector supported by governmental policy focus.

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