100% Renewable Energy franchisee model for rural region
Background and Rationale:
As per the definition in the Electricity Act, 2003, “A franchisee means a person authorised by a distribution licensee to distribute electricity on its behalf in a particular area within his area of supply.”
A DF involves a third party authorized by the DISCOM to manage electricity distribution tasks such as meter reading, billing, revenue collection, and network maintenance. The franchisee operates under a specific payment and incentive model based on performance, loss reduction, or revenue targets. This arrangement aims to improve the operational efficiency and financial health of the distribution network while meeting service quality standards. Below are the different franchisee models:
The Distribution Franchisee model, recognized under the Electricity Act, 2003, enables DISCOMs to authorize third parties to manage electricity distribution in specified areas. While past experiences show mixed outcomes, successful cases like Bhiwandi (Maharashtra) demonstrate that input-based franchisees can reduce AT&C losses, improve service reliability, and enhance financial performance.
Franchisee Model for 100% RE in rural region:
Energy consumption data from two districts in western India shows that the average revenue per unit is INR 7.53/kWh in the first and INR 7.30/kWh in the second, which is lower than the Average Cost of Supply (ACoS) by INR 1.40/kWh and INR 1.63/kWh, respectively. Some talukas are facing even larger gaps of INR 2.32/kWh as shown in figure 1.
This shortfall is primarily due to high consumption by subsidized residential and agricultural users. To reduce this revenue gap and improve supply efficiency, implementing distributed RE, such as solar power, at feeder or substation levels near load centres is a potential solution. Generating solar power locally can lower power purchase costs and can reduce technical losses by reducing transmission distances. A franchisee model can facilitate this by allowing franchisees to invest in solar projects, collect revenue directly from consumers, and pay network charges to the utility. This approach supports rural electrification and financial sustainability while improving power quality and access. This model integrates decentralized RE generation such as solar, wind, or hybrid systems, with battery storage and energy banking to ensure a reliable and cost-effective power supply. It focuses on non-agricultural rural loads such as domestic, commercial, industrial, and public infrastructure consumption, complementing agricultural feeder solarization. By localizing RE generation and distribution through a franchisee, this solution addresses revenue shortfalls, reduces costs, minimizes losses, and improves power quality and reliability in rural areas.
RE-based rural franchisee – a proposition:
The decentralized RE franchisee operates at block/substation or taluka level, investing in renewable energy plants and managing local distribution on behalf of the DISCOM. Proposed structure for 100% RE franchisee model is given in figure 2.
Energy Flow: Power supplied from both grid and local RE plants; battery storage/energy banking ensures round-the-clock reliability.
Financial Flow: Consumers pay bills to the franchisee, which in turn pays DISCOMs for network usage and banking. Profits arise from cost-efficient RE generation and operational improvements.
Operational Flow: The franchisee installs and operate RE plant and integrate it with feeder/substation, collects bills from consumers.
