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Cover Story | July 2017

Is Micro-grid the Answer to Rural India's Power Woes?

Rudranil Roysharma, GM & Senior Consultant, Energy Vertical, Feedback Business Consulting Services Private Limited.

Micro-grid can be defined as a small network of electricity users with a local source of supply that is usually attached to a centralised national grid but is able to function independently. From India's context, rural micro-grid is a small electricity network implemented at a village level with its own generation unit.

The electricity generated is thus supplied primarily to the village households and in some cases to some commercial load centres. These micro-grids are often not connected to the national grid and have been set up in the villages where there is no grid connection or where even if there is grid, power supply is highly erratic.

Micro-grid evolution
Rural micro-grid is not a new concept for India. The country has been a pioneer in rural micro-grids since 1990s through participation from the private entrepreneurs. These entrepreneurs took the initiative to light up villages which were under the curse of dark since ages.

In those days, when solar power was not available or was not an affordable technology, biomass or husk-based generation was a technology of choice. With the advent of technology, solar power based micro-grid has now become an obvious choice for developers due to various reasons.

These solar plants are modular in nature, capacity can be scaled up easily, easier and faster to install, fuel availability is not an issue, and O&M is simpler. Capacity of these solar micro-grids vary from less than a kW to as high as 10-12 kW. India Energy Storage Alliance (IESA) estimates that India has installed over 2,000 AC micro-grids of over 5 kW by 2016 and over 10,000 DC micro-grids with the majority sized at less than 1 kW.

Need & requirement
A solar micro-grid will typically have a set of solar individual modules with capacity of 150û400 W, a set of solar batteries with storage capacity of 75û150 Ah, controllers in some places, inverters for DC to AC conversion for bigger micro-grids and finally a set of cables carrying the electricity to the households and other commercial load points.

The households generally get to light 2-3 bulbs and a plug point for charging mobiles. Most of the cases, power from the micro-grid is consumed between 6û11 pm in the night. In most of the villages, there is no meter installed to measure the consumption and villagers pay a fixed sum every month, irrespective of their consumption.

In 2014, the World Bank ranked India as home to the world's largest unelectrified population. Power was either unaffordable, inadequate or non-existent for 240 million people, according to data from the International Energy Agency (IEA). The residential sector consumes only about 22 per cent of India's net generation compared to 37 per cent in the United States.

Many Indians with access to electricity, particularly in rural areas, experience chronic rolling blackouts, power outages, and curtailments. The present government has decided to ensure 'Power for All' by 2019 and decided to electrify the balance 18,452 unelectrified villages within 1,000 days. Till date, it has been able to electrify 12,699 villages.

It is important to know the definition of electrification from Indian context. A village is called electrified if only 10 per cent of its households and other common places like schools etc., have access to electricity. Thus, though most of the villages in the country is now electrified, some 47 million rural households are still without electricity, and even those connected to the grid suffer from frequent outages.

Growth opportunities
Experts believe that the business opportunity in the field of rural micro-grid in India is huge. Thus in recent times, apart from private entrepreneurs, some global technology giants have also shown business interest in India's rural micro-grid sector. By participating in rural micro-grid projects they have tried to showcase their technology for such applications.

So far, these rural micro-grid projects have been funded through various routes - there has been participation from private entrepreneurs, corporates, NGOs, discoms and technology companies. Some of the developers have even been able to get funding from outside agencies like Asian Development Bank (ADB), USAID's Development Innovation Ventures, International Finance Corporation etc.

The government also provides significant subsidy to these micro-grid projects and developers have also worked out various business models in order to make the ventures sustainable. Some developers have focused on villages where there are telecom towers nearby in order to ensure constant load, while some have identified a Village Level Entrepreneur (VLE) who has been made the owner of the asset to bring more accountability at the village level.

On the similar lines, some developers have made the rural communities themselves eventual owner of the solar micro-grids they set up. It will take some time for the developers to figure out the perfect business model for rural micro-grids and we expect some consolidation to happen in this industry in the coming time.

Forward path
However, the industry is plagued with some challenges. The biggest one in operating a micro-grid is the uncertainty around tariff payment and the absence of large commercial loads in villages. The developers wants to ensure steady recovery of their capital investment and money to fund the maintenance expenditure. This uncertainty increases the risk profile of the project significantly.

The second challenge is the sustainability of the venture in case the grid eventually reaches the village and villagers decided to switch to the grid network due to lower tariff. This has been in the mind of most of the developers and nobody could give a proper exit strategy if this happens. Most of the developers are expecting a regulation from the government for the micro-grid villages to sustain their business over a long term.

The third challenge is the availability of funding at concessional rates to developers. Most of these projects are high risk projects and many developers are small time private entrepreneurs, hence loan should be available to them at a lower interest rate and government may think of increasing subsidy for such projects.

The fourth challenge is to ensure security of the assets. Many developers have reported cases of theft of assets, breakage of solar panels etc. However, they are unable to maintain an operator for the assets as this may increase the operational cost of the project.

Other than these, there are challenges like approvals for laying underground cables when the network crosses any highway, less or no growth in electricity demand from the villagers, and limited scope of expansion to other villages, etc.

While the challenges are plenty, micro-grids have been a silver lining in the long history of darkness for rural India. It is time for all stakeholders to come to a single platform, engage into discussions and come out with a model which is profitable and sustainable, and can be easily replicated and scaled up.

Support from the government as well as the international community will be critical in this journey of bringing light to each and every household of India.

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