Innovative Business Models

Debajit PalitAssociate Director, TERI

February 7, 2013, Kathmandu

Workshop on

Sharing Business Models and Scaling up Mini

Grids in Asia and Pacific

Mini-Grids in India

� Pioneer of Mini-Grid system

� First mini grid commissioned in 1996 in Sunderban Islands

� State-of-the-art system designs & use of components

(converters & inverters), continuing till date

� Cooperative model of service delivery

� Involvement of local community from planning stage

� Policy enablers from time to time

� Around 5000 villages covered through mini-grids, serving

more than 50,000 HHs

� Multiple technology adopted

Managing Mini Grids: Earlier Model

FUNDING AGENCY

PIA

Power PlantVEC

System

Supplier

Consumers

Consultant (DPR, system design, TA support)

Organize VEC

System Engineering.System Owner

$

Installation &Commissioning

• System custodian• O&M • LT line Maintenance

Electricity

Grant from Central GovernmentEquity by PIA/NGO or Beneficiaries

Revenue: Tariff, billing, collection

Village Energy Committee (VEC) Model

Source: TERI, 2011

Case Examples of Emerging Models

• Community Based

• Entrepreneur Driven

• Pro-Poor Public Private Partnership

How we can Introduce Smartness

Multiple Energy Sources

• Solar PV

• Wind Aero Generators

• Biomass Gasifier

• Hybrid Systems

Multiple Applications

• Charging lanterns

• Powering computers,

• Charging cell phones

• Water purification

• Micro enterprises

Located near the energy utilization points in a village to provide

electricity services as per the community’s need

Solar Multi UtilityCommunity based model

Source: TERI , 2012

Solar Multi Utility

Self Help Groups, Farmer’s Associations & Individuals from the

surrounding villages access the SMU & utilize services for a fee.

Self Help Groups, Farmer’s Associations & Individuals from the

surrounding villages access the SMU & utilize services for a fee.

Source: TERI , 2012

TERI

• Overall Project Management

• Raise Grant support for the projects (~ 75%)

SMU

Technology Provider

• Installation of power

plant

• AMC

Local Partner (~ 15%)

• Scoping, community

mobilization, monitoring

& training

Users (~ 10%)

• Farmer’s Associations,

SHGs, Individuals

• Payment for services &

new investments

VEC

• Operation & collection

of revenue

• Maintenance & saving

for replacement

Institutional Model

Source: TERI , 2012

Sustainability – going beyond technology

Institutional

� Creating linkages with other developmental

programs/ marketing agencies

� Local capacities developed to operate and manage

the system

Technical/

Social

� Energy efficient system & intelligent load

management for reduced peak demand

� Need based design with standard procedures for

operation

Financial

� Variable grant : equity ratio.

� Customized pricing strategies to suit particular

livelihood activities

Some glimpses

Manure

Mixer

Sattu

Grinder

INR/kg

Annualized Equity for

setting up of unit

0.75 0.43

Buying cost of

Electricity

0.21 0.21

O&M cost 0.5 0.5

Logistics Cost 1 1

Value of service 5% 5%

Risk 10% 10%

Inflation 8% 8%

% of profit 25% 25%

Service charge 7% 7%

Actual process cost 4.04 3.48

Ability to Pay 5 2.5

Profit/Loss 0.96 -0.98

Final Processing Cost 5 2.5

LUCE

INR/kWh

Elect Price

INR/kg

Prod Cost

INR/kg

7 0.21 4.04

10 0.3 4.19

15 0.45 4.44

20 0.6 4.68]

• Sale price of solar electricity

can be kept high and it does

not significantly affect the

price of service

• Regulation vs. No regulation

SMU Business Unit

Source: TERI , 2012

DC distribution lines (voltage varies depending on distance) run along

rooftops from the battery bank to households over a short distance to

power lights, mobiles etc.

Solar DC micro grid Entrepreneur Driven

Running time : 5-6 hours

Installation Cost: Rs 3200 – 3800 per HH

Tariff: Rs 120 – 150 per month, charged

by the operators

Source: TERI , 2012

Institutional Framework

Entrepreneurs have invested 45% of the hardware cost. Having

seen the success of this initial phase, more entrepreneurs are now

willing to invest around 60% of the cost.

2%

12%

11%

74%

1%

34 systems implemented 34 systems implemented 34 systems implemented 34 systems implemented in UP, India in UP, India in UP, India in UP, India

Handicraft cluster Handloom cluster

Households Market place

Poultry

End user Distribution

� Providing access to population earning less than 1$/day

� Remote, tribal communities w/o cash disposable income

� Subsidy vs. financing – affordability ?

� Subsidy for capital infrastructure ?

� ensuing operational sustainability improved

quality of life

Solar Mini Grids in ChhattisgarhPro-Poor PPP

CREDA has reportedly electrified around 35,000

households through solar PV based mini-grids

Financing • Capital cost ~ 25000 INR (500$) per household

• Capital subsidy

- 18,400 INR (368$) per HH – by MNRE under RVE program

- Balance by state government

• Tariff per connection = 30 INR/0.6$ (2x11 W CFL)

• Tariff subsidy (by Chhattisgarh government)

- 25 INR (0.5 $) per HH connection

- In Sunderban region, tariff for mini-grids ranges between 2-3$ depending on light points (3-5) for 4-5 hours supply

Source: CREDA and WBREDA

Solar mini-grid model of CREDA

Source: TERI , 2012

Some Lessons• Decentralized, usually low

capacity, covering remote areas

• Usually small loads served

• Limited by capacity and duration

of supply

• Community as stakeholder

• Tariff based on flat rate

• Clustering of projects more

successful

• Inability to meet increased demand

• Single energy resource catering to

fixed load for fixed time

• Battery – vulnerable, overdrawl by

most consumers

• Difficulty in O&M because of

remoteness

• Social issues – tampering, non

payment etc.

� Technology development – Smartness of mini-grid addressing

some of the above challenges

� Hybrid systems – addressing single resource and load issues

� Opposed to popular approach “let the community handle” -

Each entity sticks to what it does best

In conclusion

Ecosystem(AAQS)

Appropriate technical

design

Innovative Financing

Local Skills

Enabling Policy

Su

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con

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