Around 300 million Indians lack access to electricity, the largest chunk among the world’s 1.2 billion people in this situation. The International Energy Agency estimates that 55% of these people will have to get their access through micro-grids, individual lighting systems and other alternatives to central grid connections. So how effective are micro-grids?
A 2011 review of the rural electrification situation across 10 states in India revealed that more than 25% of all households were dependent on sources other than the grid for electricity. States like Uttar Pradesh and Bihar reported lack of electricity to the extent of 76% and 90% respectively. Across these 10 states alone, the number of rural households which did not have access to electricity was 67.6 million.
The situation has only become worse since 2001, when 62.29 million rural households across these ten states were without electricity, according to findings by New Ventures. This was corroborated by the International Energy Agency (IEA) in 2012, which stated that around 300 million people in India do not have access to electricity.
In such a scenario, the role of micro-grids has assumed immense relevance. A recent study which evaluated the contribution of micro-grids in electrification of developing countries states,
“Micro-grids, distributed systems of local energy generation, transmission and use, are today technologically and operationally ready to provide communities with electricity services, particularly in rural and peri-urban areas of less developed countries.”
Researchers from Carnegie Mellon University and the Renewable and Appropriate Energy Laboratory of the University of California, Berkeley, along with the UN Foundation’s Energy Access Practitioner Network, collaborated on Micro-grids for Rural Electrification: A critical review of best practices based on seven case studies, which was released by the United Nations Foundation this February.
According to Daniel M. Kammen, who led the research, micro-grids are the fastest growing sector of new energy access, with roughly half of all the new micro-grids in India. Also, rural micro-grids are the most rapidly evolving, with new technology – meters, sensors, low-cost solar panels.
Micro-grids have transformed the lives of villagers in Sharif, Siwan and West Champaran districts of Bihar, and in Gonda, Sitapur, Hardoi and Unnao districts of Uttar Pradesh. They have reduced the use of kerosene, giving access to a safer and cleaner lifestyle. Better lighting in the evenings has come as a boon to businesses and students, according to field studies conducted by New Ventures.
New Ventures is a company which addresses the key barriers to “green” entrepreneurial growth by building in-country support networks for environmental enterprises and increasing their access to finance.
Yashraj Khaitan, founder and CEO of Gram Power, states, “Smart micro-grids can help combat the existing power woes. For instance, in rural areas, decentralised generation can be customised and designed to meet energy needs at the village level. Smart pre-paid meters, such as those developed by Gram Power, allow consumers to make small payments at their doorsteps. Apart from eliminating billing problems, thefts too can be curbed.”
Citing the case of AC micro-grids, he adds, “The ones designed by Gram Power are grid compatible. So, the infrastructure becomes even more useful (for peak demand management) when these micro-grids are integrated with the grid.”
With these micro-grids, the operator can check and control household meters from a remote location, thus lowering operational costs significantly. In urban areas, smart micro-grids allow large campuses to interact intelligently with the grid and this can be very useful for peak load management.
Nikhil Jaisinghani, co-founder of Mera Gao Power (MGP), which is helping light up several villages in Uttar Pradesh, explains, “As of now, almost two-thirds of the population does not have access to the grid and there is power shortage. Around 200 million people connected to the grid are not getting enough power to light up their homes, and so the main grid cannot cover the entire population. Even the operating costs are not covered in the conventional grid. Micro-grids, on the other hand, are a very valuable and effective source of power, the models are much more scalable, as has been proved in village hamlets where they have been set up. In times when energy paucity continues, off grid companies are providing people with energy, in fact, in some communities, they are providing better quality power than the grid.”
The challenges ahead
However, there are issues which continue to impact the functioning of the micro-grid sector. Khaitan of Gram Power says, “Insufficient supply, 77 million families still relying on kerosene as the primary source of lighting, rampant theft and incorrect bills with people having to travel long distances to pay their bills are some of the issues in rural areas now. As for the urban areas, there is supply-demand imbalance and increasing power cuts.”
Aspects such as finance and policy too are concerns which confront the sector presently. The report released by the UN Foundation says financial viability and energy service reliability are the key issues for the success of micro-grids. “Financing is needed to get over that initial ‘valley of death’ where revenues have not yet started,” says principal author Kammen.
Adequately financed and operated micro-grids, he feels, can overcome most of the challenges faced by traditional lighting. “The financing and management challenges have been considerable. Up-front capital is needed to install grids before the revenue begins. This has made them hard to fund in rural areas where initial energy usage levels is generally low. The training is needed in advance, too, for the managers, further increasing this burden. In cases where the communities have an ‘anchor’ customer – a mill or small business, the burden has been lessened.”
On the other hand, expanding the grid to remote villages is more expensive than setting up a micro-grid, Khaitan points out. It is just that this expense is not properly accounted for. “Since grid extension is 100% subsidised, the capital cost of micro-grids for rural India must also be funded by the government,” Khaitan demands. “Also, micro-grids must be made operationally viable to last more than 10 years. This can be made possible with our technology and high degree of community involvement.”
“Though funds are available through government schemes, they have high barriers to access and don’t necessarily support innovative solutions from start-up companies,” he adds, while agreeing that policies are becoming more supportive.
According to Sanjoy Sanyal, Country Director at New Ventures, one has to find an innovative way of dealing with the challenges at the customer, VLE and enterprise levels.
Sanyal – who has co-authored a report on micro-grids in UP and Bihar – suggests that public funds be used to support the micro-grid business in areas which have not yet been electrified and grid penetration has been slow. Promoting awareness about the micro grids and supporting research and development can reduce the cost further. Corporate Social Responsibility funds can be moved to areas which have seen limited growth in grid penetration to support the micro grid enterprises – starting with small hamlets and then extending to larger villages. Another important point is to ensure that VLEs have access to finance.
“Policy to standardise agreements between communities and developers would lower everyone’s risk. Government inspection and standards would help, too,” says Kammen.
There are other problems – some users connecting additional loads causing grid overloading, power theft, and getting a new concept across. But micro-grid operators continue to make inroads. These enterprises have tied up with VLEs to deal with some of the challenges. Though they continue to face the issue of access to finance to set up the plant, the VLEs install and operate the plant in their villages. Also, they help provide employment at the village level and this can definitely help in scaling up micro-grids across villages.
Jaisinghani of Mera Gao Power (MGP) says that in spite of issues with infrastructure, finance and policy, it just takes one day for companies like his to set up a micro-grid. “Micro-grids are cost-effective and are able to help people light up their homes and charge their devices at a much lower cost. For instance, in Uttar Pradesh, the grid’s fixed fee is Rs 160 and in Bihar it is Rs 175 per month plus energy fee, whereas MGP charges Rs 100 per month for more dependable, unsubsidised service.”
Using the internet
Then there are companies like Gram Power, whose technology essentially brings up the entire power infrastructure at the last mile on the internet, allowing very efficient management of power distribution remotely. Wireless, real time payment technology greatly benefits consumers as well as utilities, by eliminating billing problems and making payments affordable.
“Gram Power has a model customised for rural India and automatic theft detection systems prevent line or meter tampering. It also ensures a high degree of community participation in these projects. In fact, some projects are even owned and operated by the community. Load prioritisation allows the community to decide which load is most important, for example, running pumps longer during winters by reducing the household demand,” elaborates Khaitan.
Attention to human capacity and training is needed as well, as Kammen and his team found during the course of their study that involved visits to 12 micro-grids in India, Malaysia and Haiti in January 2013. “A great deal of attention is needed to human capacity and training as to the hardware. However, when this is done the results can be spectacular, with great numbers of new community members wishing to make connections, revenues growing, and in some of the best run mini-grids, the business model has been booming,” says Kammen.
Jaisinghani is of the opinion that the opportunity is definitely there, what is needed is a consolidation of the model in India and fewer regulations restricting access to the financing required to scale up operations. “As of now, there are various models that exist. A consensus and scalable model will surely help in a big way,” he concludes.