The problem of energy access in India is enormous. According to the International Energy Agency, some 237 million Indians (close to a fifth of the population) were living without electricity as of 2015. 

Many more have only limited access, with some getting power for just a few hours per day. People often rely on diesel generators as a result, which are dirty, noisy and expensive -- about the worst solution one can imagine from a public policy point of view.

To handle rising demand, India will have to add about 15 gigawatts of capacity per year for 30 years. Indian coal-fired plants, which currently provide 70 percent of the country’s electricity, are particularly dirty. Although cheap on a per-kilowatt-hour basis for now, the environmental costs of relying on coal would be disastrous. 

According to MIT Technology Review, if India grew its power supply through conventional means, by 2050, it would be adding more new carbon to the atmosphere every year than total U.S. emissions in 2013.

Aside from coal, there are few other conventional options. About 15 percent of total capacity is from hydropower, but this is vulnerable to drought, and only a limited number of new dams can be built. About 3.2 percent of all electricity in India comes from nearly 6 GW of nuclear, but adding nuclear capacity is slow and carries its own significant risks. The country also has little in the way of natural-gas resources.

As such, renewables are seen as critical for the future. India is seeking to add 175 gigawatts of renewable capacity through 2022, up from its current 36 gigawatts. The government wants 100 gigawatts of that capacity to be solar.   

Today, solar systems in India span a wide spectrum. Off-grid systems are mainly used in rural areas. These have an immediate impact on energy poverty and air pollution and have captured the imagination of many Western social impact investors. However, these systems can be very expensive if high availability is the goal. 

On the other end are utility-scale installations, which are being bid at record lows as foreign players compete for projects.  The challenge with centralized solar is that India’s distribution companies can barely transmit the power they have now, let alone large additions of variable solar energy. They suffer over 22.7 percent losses from transmission inefficiencies and theft, and have around $70 billion in collective debt. Debt relief and reforms are underway, but they will take time, especially because local governments control rate structures.

Between the two extremes of this solar generation spectrum, there is a critical gap in the middle.

This gap must be filled to help solve India’s generation and distribution problems. There is growing hope that grid-tied rooftop PV will be the answer. The Indian government has recognized this and announced that of its 100-gigawatt solar target by 2022, 40 gigawatts should be rooftop.

However, strategies for promoting rooftop solar used in other parts of the world will not work as well in India. As mentioned, prices are distorted by politically-influenced low rate structures.

For example, in the southern state of Kerala, homeowners pay an average of Rs. 5.5 ($.083) per kilowatt-hour. But if they net-meter, they only get paid about Rs. 4.45 ($.067) for surplus energy. 

The economic case is better for industrial and commercial rooftops, although likely not nearly sufficient to attain government targets. Feed-in tariffs are unlikely to work because utilities cannot afford them. And companies may not yet have the billing infrastructure to manage net metering or other kind of power exports. 

Another strategy, already emerging, is to mandate solar on new construction. However, such public-sector solutions are inherently slow because electricity policy is shared between the central government, state governments, and grid operators. India has already implemented Renewable Purchase Obligations (RPOs), but these have so far been largely ignored due to lack of enforcement.

Even if other incentives for net-metered rooftop solar were implemented, such as tax credits, there are two important technical problems.

First, grid-tied systems with bidirectional flow under current regulations are not allowed to run during power cuts for safety reasons. In a country where 400 million people regularly experience blackouts, this would impact a lot of potential customers. 

Second, the mismatch between solar production and typical load profiles is difficult for grids to manage (on many days, demand may ramp up in the evenings just when solar production ramps down). While it may help local utilities to get an injection of distributed power from rooftop PV at times of high demand, being able to absorb this mismatch, especially with higher penetrations, would require large infrastructure investments for which there are few resources.

To fill the gap between off-grid and utility-scale solar, a solution must help customers save money while also assisting the fragile grid. Ideally, it should be privately financed and be less exposed to the vagaries of public policy. 

Enter the solar-plus-storage system.  

Intelligent solar-plus-storage systems with lithium-ion batteries will leverage much more than falling costs of batteries and solar PV.  Using the internet and analytics, they create the opportunity for something highly disruptive: distributed virtual utilities.

They gather information about coming weather, scheduled power cuts, and load patterns so they can provide reliable power at the lowest cost compared to existing backup technologies. They do take power from the grid, but because of their analytics and efficiency, they do not have to sell power back to the grid in order to save the customer money. And since they don’t sell power to the grid, there are fewer safety measures and much less red tape to get them installed.

These systems could cause the biggest change in the power industry since Edison. They are already being used in Germany, Australia, and the U.S. to arbitrage against the highest tiers of grid power, and their adoption is expected to spread quickly. 

A recent report forecasts that “solar rooftop power [will] combine with storage [to] be cheaper than grid power after 2022 for a large section of consumers.” It predicts the solar rooftop market in India could reach 49 gigawatts by 2025, or about 30 percent of its total solar. 

Similarly, in The Economics of Load Defection, the Rocky Mountain Institute concluded that between 2010 and 2030, rooftop solar will become economic for large swaths of the U.S.

At today’s prices, smart grid-tied solar-plus-storage systems are ready to explode now in India because they compete against the power from diesel generators.

These systems can fill the gap in India’s solar generation spectrum while adding value on both ends of that spectrum. On one end, their deployment will help drive down component costs for rural customers looking to electrify. On the other end, they will eventually become available to support the transmission and distribution grid, which in turn will help the distribution of utility-scale solar.

We have already seen how quickly technology is transforming other industries. India stands at the threshold of a similar transformation in the energy sector. 


Zyg Kunczynski is the chief commercial officer for YouSolar, Inc. Eric Gimon is an early investor in the company.