renewable energy-based rural electrification: the mini-grid experience from india

7/21/2019 Renewable energy-based rural electrification: The mini-grid experience from India

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Renewable energy-based rural electrification:

The mini-grid experiencefrom India

Prepared forGlobal Network on

Energy for SustainableDevelopment (GNESD)

SUSTAINABLE

ENERGY FOR ALL


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Renewable energy-based rural electrification:

The mini-grid experiencefrom India

SUSTAINABLE

ENERGY FOR ALL

Prepared for

Global Network on Energy for Sustainable Development (GNESD)

Authors

Debajit Palit and Gopal K Sarangi


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Full citationGNESD. 2014 Renewable energy-based rural electrification: Te Mini-Grid

Experience rom India. New Delhi: Prepared by Te Energy and Resources In-

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Table of Contents

Introduction 9

Study objectives and approach 11

Assessment o renewable energy-based mini-grids in India 12

Policies and regulation 13

echnical eatures and capacity 15

Service delivery models 16

Financing 21

ariffs 22

Operation and management 23 Community participation and capacity building 24

Challenges in dissemination o mini-grids 25

Conclusions and lessons learned 27

Institutional 27

Choice o technology 27

Cluster approach or implementation 29

Enabling policy and regulatory environment 29

Local capacity-building 30

Reerences 31


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List of Abbreviations

A-B-C Anchor, Business groups and Community members

AMC Annual Maintenance Contract

BM Built and Maintain

BOM Built-Operate-Maintain

BOOM Built-Owned-Operated-Maintained

CREDA Chhattisgarh Renewable Energy Development Agency

CSR Corporate Social Responsibility

DDG Decentralised Distributed Generation

DISCOM Electricity Distribution Company

ESP Energy Service Provider

GNESD Global Network on Energy or Sustainable DevelopmentHPS Husk Power Systems

JNNSM Jawaharlal Nehru National Solar Mission

MGP Mera Gao Micro Grid Power

MNRE Ministry o New and Renewable Energy

NGO Non-Governmental Organisation

PIA Project Implementation Agency

REC Rural Electricity Co-operatives

RGGVY Rahul Gandhi Grameen Vidyutikaran Yojana

RVEP Remote Village Electrification Programme

SCS Solar Charging Stations

SHS Solar Home Systems

VDC Village Development Committee

VEC Village Energy Committee

VESP Village Energy Security Programme

WBREDA West Bengal Renewable Energy Development Agency


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Foreword 7

Foreword

Te predominant orm o electrification in India, as in the rest o the world, has

been and still is connection to national grids. Still there remain significant po-

pulations in remote areas where the grid has not reached, and where decentra-

lised options are attractive. Combined with cost decreases and improvements

in the reliability o the technology, renewable energy orms such as solar PV,

biogas and small hydro are becoming increasingly relevant to fill the gap in

electricity supply to areas that are not yet connected to main grids.

Te development o mini-grids, based on such renewable energy sources, has

been particularly successul in India. Tis report provides a review o experien-

ce o mini-grids in India with specific reerences to successul cases.

Te study was partially unded by the International Renewable Energy Agency

(IRENA) whom the GNESD secretariat grateully thanks or support.

Emmanuel Ackom John M. Christensen Gordon A. Mackenzie

GNESD Secretariat

UNEP DU Partnership

Denmark


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Introduction 9

Introduction

India is predominantly a rural country with approximately

70 percent o the total population living in villages. Tus,

Indias economic and social development is inherently lin-

ked to growth in the rural sector. In order to contribute to

Indias overall development, the rural sector must have ac-

cess to modern orms o energy such as electricity. Despite

efforts by the ederal and provincial governments in India

to improve electricity access and services during the last

five decades, household electrification levels and electricity

availability continues to lag behind the global average. Whi-

le the global average electrification rate in 2011 was 81.9percent, the average electrification rate or India stood at

75.3 percent, with rural area having only 66.9 percent (IEA,

2013). In absolute terms, almost 77 million households in

India were living without electricity in 2011 (Figure 1). Te

lower household electrification level reflects that historical-

ly the electrification rate has been measured as a percenta-

ge o electrified villages with grid extensions to any point

within village revenue boundaries. Tis was irrespective o

whether any household was actually connected, and thus

did not provide a true percentage o connected households.

While the definition o an electrified village was modified

in 2004 by the introduction o criteria such as the requi-

rement o village electricity inrastructure and a minimum

o 10 percent household coverage etc., this is still limited

to the target o achieving physical access without providing

adequate importance to the delivery and reliability o the

electricity services. Te slow pace o electrification is also

attributed to sporadic policy ocus in the past (Bhattacha-

ryya, 2006). Besides, a host o other issues such as political

economy concerns (Rao, 2013) and constraints at the insti-

tutional and organisation levels (Cust et al., 2007) etc. alsohave contributed to the slow progress o rural electrification

in India.

Figure 1: Electricity access in India (Census of India 2011)

Grid-based electrification has been the predominant orm

or electrification in India, covering almost 94.5 percent o

the inhabited area. In addition, renewable energy-based

off-grid and decentralised technologies1 have also been

disseminated in areas that are either inaccessible or grid

connectivity or are part o hamlets that are not recognised

1 ESMAP defines the decentralized system as an alternative ap-

proach to production o electricity and the undertaking and manage-

ment o electrification project that may be grid connected or not i.e.

off-grid. An off-grid electricity supply can take two orms individual

product-based solutions and community or collective network-based

solutions. Individual solutions involve sale o a product (or sometimes

service) that enables individual households to produce a small quanti-

ty o electrical energy (at low voltage) to meet basic household needs

such as lighting or providing energy or charging mobile or running

simple electrical appliances such as a television, an etc. Community

or collective solutions serve a cluster o households or an entire village

and provide electricity generally by generating rom a diverse range osmall local generators, with or without its own storage, and distribut-

ing it amongst the consumers. Tey are commonly called mini-grid or

micro grid depending on capacity and scale o operation.

0

20

Kerosene

40

60

80

100

Rural Urban Total

Electricity Solar Others


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10 Renewable energy-based rural electrication: The mini-grid experience from India

as villages as per the national census record (Palit and

Chaurey, 2011). Te common renewable energy-based

technologies used or electrification o remote areas are

solar PV, biomass gasifier and mini/micro hydro. Renew-

able energy-based decentralised technologies, such as solar

home systems (SHS) and solar charging stations (SCS) have

been deployed in grid-connected areas where availabili-ty o reliable and adequate electricity has been a concern.

Te state renewable energy development agencies, estab-

lished by the state governments and working under the ae-

gis o the Indian Ministry o New and Renewable Energy

(MNRE), have largely implemented these initiatives. In ad-

dition, NGOs have implemented numerous pilot projects

by raising unds rom donor agencies and receiving unds

rom corporate social responsibility (CSR) initiatives. Re-

cent trends also indicate that the off-grid energy sector isincreasingly emerging as a ocus or private investors in

starting new business ventures.

Electricity tower in Nagpur, India. Photo credit: Harshad Sharma, Flickr, Creative Commons.


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Study objectives and approach 11

Study objectives and approach

Tis study investigates renewable energy-based rural ele-

ctrification in India, with a specific ocus on the mini and

micro-grid experiences. Specific reerences are made to so-

lar PV and biomass-based technologies implemented under

publicly supported programmes like the Remote Village

Electrification programme (RVEP) and the Village Ener-

gy Security programme (VESP) o MNRE. Under publicly

supported programmes, two different variants o mini-grids

promoted under two different settings are examined here

in depth. Tese are the Sunderbans mini-grid model pro-

moted by the West Bengal Renewable Energy DevelopmentAgency (WBREDA) and the Chhattisgarh mini-grid model

promoted by the Chhattisgarh Renewable Energy Develop-

ment Agency (CREDA). While the renewable energy-based

mini-grids were pioneered in the Sunderbans during the

mid-nineties, Chhattisgarh has implemented the largest

number o mini-grids in India covering more than 1400 off-

grid habitations in the last decade. Also, the mini-grids in

Chhattisgarh are based on micro solar PV plants and bio-

mass gasifiers, while WBREDA has mostly implemented

solar PV or hybrid mini-grids. Additionally, the study also

ocuses on mini-grids deployed by private companies such

as Husk Power Systems (HPS) and Mera Gao Micro Grid

Power (MGP). In order to better comprehend a comparati-

ve perspective o mini-grid variants, the report has analysed

the mini-grid experiences by examining technologies adop-

ted, policies and incentives, business models, financing and

tariff structures, and community participation. Te study

also highlights trends in the implementation o mini-grids

(both technological developments as well as institutional

evolutions), and the evolving policy dynamics used to pro-

mote and incentivise both private and publicly supportedmini-grid developments in India.

Te research ramework o the study draws rom an exten-

sive review o the literature, supplemented by field visits to

selected sites, stakeholder interviews and a ew ocus group

discussions. Te study relied on a triangulation o multiple

sources o data (Yin, 2003). For example, inormation rom

field visits was cross-validated by stakeholder interviews

with officials/management staff working at different levels

in the management hierarchy. While the basic structure o

this report is laid by the extensive analysis o peer-reviewed

literature, available grey reports and other secondary stu-

dies and reports, the key analytical contents o the report

are built through explanatory case studies o mini-grid vari-

ants operating in different parts o the country. A purposive

sampling technique has been applied to select the chosen

case studies or analysis, keeping in consideration the need

to capture the existing variations. A semi-structured inter-

view ormat was administered to carry out the stakeholder

interviews. Moreover, some selected telephonic discussions

were also undertaken to cross-validate the findings rom thefield visits and stakeholder interviews. However, a major

challenge aced during the study relates to inadequate data

availability on the mini-grid initiatives promoted by the pri-

vate enterprises, primarily because o their recent entry in

the field and confidentiality o the intellectual property with

respect to their business model. Nevertheless, an attempt has

been made to present a comparative perspective o different

mini-grid models, i.e. public, private and NGOs driven in

the study.

A solar mini grid in Chhattisgarh, India. Photo credit: Gopal K Sarangi.


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Assessment of renewable energy-based mini-grids in India

Te concept o solar PV mini-grids in India was pioneered

in the 1990s in the Sunderban delta region in the state o

West Bengal and in the orested region o Chhattisgarh state

(then part o Madhya Pradesh state). A solar PV power plant

o 25kWpcapacity was installed in 1996 by WBREDA in Ka-

malpur village (Sagar Island), which continues to energise

the village to this day. Similarly, in Chhattisgarh, the first

solar power plant was installed at a village called Lamni in

Bilaspur district that is still reportedly operational. Terea-

ter, mini-grids connected to solar PV, biomass or small hy-

dro, have been implemented in various states, notably Bihar,Chhattisgarh, Lakshadweep, Madhya Pradesh, Odisha, Ut-

tar Pradesh, Uttarakhand and West Bengal.2Depending on

their capacity, mini-grids provide electricity or households,

small commercial activities, or community requirements

such as the supply o drinking water, street lighting, vaccine

rerigeration, and schools. echnically, mini-grids are pre-

erred over other modes like solar home-lighting systems

(SHSs), as mini-grids provide electricity services or lighting

as well as or operating various appliances, whereas SHSs

typically provide only lighting services.

While the Ministry o Power is the nodal ministry or the

extension o the centralised grid electrification system in the

country, it has also been instrumental to promote renewable

energy-based mini-grids to electriy remote and ar-off are-

as. Te MNRE started promoting mini-grids under the off-

grid electrification programmes during the late nineties and

early part o 2000 to cover villages that are unlikely to be

covered through grid extension. At that time, the Govern-

ment o India estimated that there were around 25,000 re-

2 In many villages across India, especially in Bihar, Madhya Pradesh

and Uttar Pradesh, use o diesel generator (called choti bijli) is com-

mon. Tese are usually owned by individuals and used to supply power

to their own homes or or powering irrigation water pumps. Ofen an

enterprising villager works out an arrangement to provide power either

to a cluster o houses or or some economic activity. Te electricity is

priced as flat rate (ranging between Rs 10 and Rs 15 per kWh i con-

verted to kWh basis) and so it is availed o only by those who can afford

it or who cannot afford to do without it. Te diesel based mini-grids

were also in operation during the 90s in many o the remote villages in

hilly states o north-eastern region o India, but have been subsequent-

ly discontinued by the power departments o the respective states with

increase in prices o landed diesel to such remote areas (Kumar et al.

2007)

mote villages (out o approximately 593,732 villages as per

Census 2001), which will be difficult to connect through

grid-supplied systems. Tereore, renewable energy-based

mini-grids or stand-alone systems were considered to elec-

triy these identified remote villages. Many o these remote

villages have now been provided with renewable energy-ba-

sed mini-grids or stand-alone systems such as solar home

systems. Specifically, the Remote Village Electrification Pro-

gramme (RVEP) and the Village Energy Security Program-

me (VESP) under MNRE electrified more than 12,700 re-

mote villages and hamlets (MNRE 2013). However, with theexpanding grid, some o these villages have also been recent-

ly connected despite earlier being considered inaccessible.

Te two most successul models o mini-grids implemen-

ted by government agencies in India are those implemen-

ted by WBREDA and CREDA. WBREDA has set up more

than twenty mini-grids based on solar power plants with

an aggregated capacity o around 1 MWp supplying stable

and reliable electricity to around 10,000 households in West

Bengal. CREDA, on the other hand, has electrified around

35,000 households across more than 1400 villages and ham-

lets with low capacity (1-6kWp) solar mini-grids in Chhat-

tisgarh. In addition, biomass gasifier-based mini-grids were

also implemented under the VESP (in around 80 villages

across different states in India) or by research institutes and

NGOs such as ERI Indian Institute o Science and Devel-

opment Alternatives. NPC, the largest electricity generati-

on company in India, also used the mini-grid model to ele-

ctriy around fifeen remote un-electrified villages as part o

their corporate social responsibility efforts, mainly through

biomass-gasifier based technology.

Te private sector has also been implementing variants o

mini-grids in many states. Te private companies operate

mainly in villages where there are supply-constraints rom

the grid due to inadequate generation. Husk Power Systems

(HPS), a company based in Bihar, has electrified around

300 villages and hamlets since 2007 through establishing 80

plants, benefitting nearly 200,000 people. Te total aggregate

generation capacity is more than 3 MWe. In addition to the

biomass gasification units, HPS is also reportedly covering

un-electrified households in their operational areas through


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Assessment of renewable energy-based mini-grids in India 13

Solar Mini-grid in Kaylapara village Sagar Island, Sunderban, India.

solar DC micro-grids.3Similar initiatives are also being un-

dertaken by MGP, such as the setting up o solar DC mi-

cro-grids in the state o Uttar Pradesh to provide lighting

services using energy efficient LED bulbs. It has reportedly

connected 15,000 households spreading across 500 hamlets

in Sitapur and Barabanki districts in Uttar Pradesh. Other

private sector companies who have are providing electricity

access in rural areas, either through solar AC mini-grids or

DC micro-grids, are DESI Power, Minda Next Gen echnol-

ogies, Kuvam Energy, Gram Power, OMC power, and Gram

Oorja, etc. Tough SELCO India has also been working inthe solar energy space or more than a decade, they have

been extending the energy service mainly through custom-

ised design o solar home systems in the southern Indian

state o Karnataka. A mapping o our different mini-grid

models in India is captured in able 1.

A structured discussion on various aspects o mini-grid de-

velopments in India, such as policies and regulation, techno-

logies and sizing, business models, operation and manage-

ment systems, financing, tariffs, community involvement

and capacity building initiatives, is presented below.

Policies and regulation

Early attempts to electriy rural areas in India were limited

in size and scope, sporadic in nature, and characterised by

a lack o dedicated policies specific to rural electrification.

Most rural electrification programmes were bundled with

other rural development programmes and schemes, such

as the Minimum Needs Programme, the Prime MinisterGramodyoy Scheme, etc. (Siddiqui and Upadhyay, 2011).

Initially, mini-grids were mainly set up under the techno-

logy demonstration programme o MNRE. In 2001, with the

launch o the Rural Electricity Supply echnology Mission,

renewable energy-based decentralised generation technolo-

gies including mini-grids were a main ocus, and or the first

3 Solar DC Micro grids are designed to generate DC electricity us-

ing one or more solar panels and are distributed over a short distance

rom the battery banks to the cluster o households or shops within the

village. Tey usually supply at 24V or 48V DC to households or shops

or providing lighting services or 57 h using LED lamps.

time were considered part o mainstream rural electrifica-

tion. During the same period, the first ocused attempt by

the Government o India to look into issues related to de-

centralised generation, particularly in the context o off-grid

electrification, also took place through the Gokak Commit-

tee. Te Committee recommended that decisions between

grid connection and decentralised generation, especially

mini-grids, should consider the technical, managerial and

economic issues. Considering the higher cost in setting up

mini-grids, the Committee observed that the totality o the

socio-economic benefits accruing to various stakeholders

should be taken into consideration while evaluating the ea-

sibility o mini-grids in remote areas.

Tereafer, the Electricity Act o 2003 was enacted with

the overall objective o developing the electricity industry

and providing electricity access to all areas. It envisaged a

two-pronged approach or improving rural electricity ac-

cess: a national policy or rural electrification to extend the

reach o grid-connected supply, including the enlistment o

local initiatives in bulk purchases and rural electricity di-

stribution; and a National Electricity Policy to encourage

additional capacity addition by way o stand-alone systems,

including those based on renewable sources o energy (Fi-

gure 2). Te Act also opened the door to renewable ener-


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Figure 2: Options for Rural Electrication under the Electricity Act 2003

gy-based off-grid generation to a much greater extent than

beore. Under Section 2(63), the Act specifies distributed ge-

neration through stand-alone energy systems as a model or

rural electrification in addition to grid extension. Section 14

urther exempted a person intending to generate and distri-

bute electricity in a rural area, notified by the State Govern-

ment, rom obtaining any license rom a regulator. However,Section 53 o the same Act also mandated that such persons

shall have to conorm to the provisions relating to saety and

electricity supply rom the appropriate authority.

Te Act was ollowed up by the launch o the National Ele-

ctricity Policy in 2005 and the Rural Electrification Policy

in 2006, which emphasised that wherever grid-based elec-

trification is not easible, decentralised distributed genera-

tion (DDG) together with a local distribution network, i.e.

mini-grids, would be provided. Te policy development also

made inclusion o DDG projects a part o the Rajiv Gandhi

Grameen Vidyutikaran Yojana (RGGVY), which was a big

step in mainstreaming off-grid electrification technologies

within the ambit o the national rural electrification strategy.In addition, the two policies also enshrine that the benefits

o subsidies should be passed on to the end consumers. Te

Rural Electrification Policy also provisions that the retail

tariffs on electricity supply set by providers exempt under

Section 14 would be based on mutual agreement between

such persons and the consumers.

Designated Rural

Area

Areas with existinggrid access

Licensee or franchiseefor existing network

Parallel licenseeu/s 14

Licence exemptionu/s 13

Off-grid collective system(combined generation

and distribution)

Off-grid individualsystems

Areas with nogrid access


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Table 1. A comparative assessment of mini-grid models in India

Parameter WBREDA CREDA Husk Power System Mera Gao Power

Area o operation (Province(s)) Sunderban Chhattisgarh Bihar Uttar Pradesh

echnology Solar PV Solar PV Biomass Gasification Solar PV

ypology Publicly supported Publicly supported Private Private

First plant commissioned 1996 2004 2008 2011

Achievement 22 mini-grids

serving about 10,000

households

1439 villages & hamlets

serving about 35,000

households

80 villages serving 25,000

households

500 hamlets, serving

around 15,000 households

Average size o power plant 25-100kWp 1-6kWp 25-100kWe 120-800Wp

O & M structure Contracted out through

Annual Maintenance

Contract (AMC)

Contracted out through

AMC using cluster-based

approach

Cluster-based approach

with O&M done by the

company

Cluster-based approach

with O&M done by the

company

Energy provision 2-5 light points x 11W

CFL and an point

2x11W CFLs 2x15W CFL & plug point 2 light points and acility

or mobile phone chargingtotalling 4W

Energy application Lighting, an, V, and

some productive activities

Mostly or lighting, also

or running an and V,

etc.

Lighting, an, mobile

phone charging, etc.

Lighting and mobile

phone charging

Supply duration (hours/day) 5-6 5-6 6-8 7

Financing ariffs US$2.5 or 120W and

US$1.5 or 60W per

month

US50 per month US$2 to 3 per month US50 per week

Subsidy received Yes Yes Yes Yes

Source: ERI compilation, 2013

Technical features and capacityMini-grids vary in technical eatures, with a typical capac-

ity being between 1kWp and 200kW

p, with different states

adopting different capacities and models depending on

their local requirements and conditions. While mini-grids

in Chhattisgarh are based on micro solar PV plants (100kWp) mini-grids were deployed in the Sun-

derbans region. Furthermore, to maximise the load actor,

WBREDA established the plants near the load centre. omeet additional power demand, hybrid-generating sys-

tems have been installed by combining solar plants with

other renewable sources such as small wind-powered gen-

erators and biomass gasifiers. Tis hybridisation has helped

WBREDA to optimise the various renewable energy tech-

nologies depending on their availability and local weather

conditions. In Chhattisgarh, the mini-grid capacity has been

standardised or ease o operation and maintenance, viz. 1,

2, 3, 4, 5 and 6kWpbeing implemented with two ratings o

inverters. While the systems with an installed capacity o

1-3kWphave a battery-bank o 48V and inverter rating o


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3kVA, the systems with 4-6kWpinstalled capacity have 96V

battery-bank and inverter rating o 5kVA.

Moreover, the battery bank in most power plants in Chhat-

tisgarh was ound to last or 8-10 years, which is much hig-

her than the usual battery lie o 4-5 years prevailing in mostothers states such as in the Sunderbans region where solar

mini-grids have been implemented extensively (Ulsrud et

al., 2011). In case o the Sunderbans, the batteries have given

many extra challenges or the whole operation and have sus-

tained the solar mini-grids. Because o the battery problems,

the hours o supply to the customers afer a while became

significantly shorter than when the batteries were new. Mo-

reover, the practice among customers o drawing more ele-

ctricity than was meant by the system designers increased

the pressure on the batteries and exacerbated the problem.

While currently available battery management systems canaddress the problem o overdrawing, the degree to which

such systems can be integrated with the system are limited

by the issue o cost.

Biomass gasifier-based independent mini-grids implemen-

ted under VESP and other initiatives, such as the distribu-

ted generation programme o NPC and private initiatives

such as Husk Power Systems and DESI Power Systems, are

mostly connected to 10-50kWe generators. Since sustai-

nable uel supply is critical to biomass technology, projects

implemented under VESP emphasise the need or energy

plantations in the vicinity o the power plants. Husk Pow-

er Systems and DESI Power has diversified their source o

uel by including other biomass resources like wheat husks,

elephant grass, mustard stems, corn cobs, etc., with rice

husks to ensure a year-round source o uel. In the case o

HPS, a typical plant with capacity o 33kWe supplies elec-

tricity to about 2-4 villages (300-400 households) within a

radius o 1.5km.

Lately, private mini-grid developers and village-level en-trepreneurs are also setting up low voltage solar DC mi-

cro-grids, either on their own or under different program-

mes such as the Lighting a Billion Lives initiative by ERI.

Tese micro-grids generate DC electricity rom solar panels

and the power is distributed over a short distance rom the

battery banks to clusters o between 20 and 100 households.

Tey usually supply at 12V or 24V DC or providing lighting

services or 5-7 hours using LED lamps o 2-6 watts per hou-

sehold (2 -3 light points per household) and power or mo-

bile phone charging acilities. DC micro-grids implemented

by MGP and ERI have central storage systems and connect

around 20-50 households, whereas HPS and Kuvam Energy

are reportedly implementing micro-grids using decentrali-

sed storage batteries in the consumers households connec-

ted to centralised solar PV systems.

Additionally, smart controller and pre-paid metering sy-stems are being used in many new projects to check over-

loading as well as thef o electricity. For example, HPS has

introduced smart meters in all their mini-grid systems. It

claims to have innovated the worlds cheapest pre-paid me-

ters to put a check on the illegal consumption o electricity.

Similar efforts have also been taken by developing systems

to monitor remotely the perormance o the plant, introdu-

cing low-cost management and inormation systems, etc.

Another start-up company called Gram Power has devel-

oped a smart stackable battery called MPower, which is a

modular power source comprising o a high-density lithiumion battery and intelligent power conditioning circuitry. Te

MPower is designed in such a way that its charging is locked

to the micro-grid, i.e., no other power source but Gram

Powers electricity supply is able to charge the MPower. Tis

avoids misuse o the device and ensures revenues or the lo-

cal entrepreneur.

Service delivery modelsTe operational arteacts o mini-grids reveal that they ope-

rate under various delivery models. Most o the publicly sup-

ported mini-grids in India are structured around communi-

ty-based models, albeit with different names, such as Village

Energy Committee (VEC), Village Development Committee

(VDC) and Rural Electricity Co-operatives (REC) (Figu-

re 3). A majority o publicly supported mini-grid projects

promoted by MNRE, such as VESP and RVEP, ollow the

VEC structure with some variations. Here, the VEC or the

REC play the pivotal role as a power producer, distributor

and supplier o electricity. Te service delivery approach o

the model involves the ormation o a VEC by the ProjectImplementing Agency (PIA) usually the state renewable

energy development agency or a non-governmental orga-

nisation (NGO) with representations rom villagers and

the local governing bodies (known as Gram Panchayat). Te

VEC usually consists o nine to 13 members, with 50 percent

representation rom women members and elected village

Panchayatmembers being ex-officio members o the VEC.

Te PIA sets up the energy production systems and hands

over the acility to the VEC or day-to-day operation and

management. Te VEC thus acts as custodian o the energy

production system and is responsible or its operation and


18/32


management. Te electricity generated is distributed to the

community through local mini-grids.

In line with the provisions o the Rural Electrification Poli-

cy, ofen the tariff is set by the PIA in consultation with the

VEC. As the capital cost is almost entirely subsidised, the ta-riff is set such that the revenue can take care o the uel, ope-

ration and maintenance costs including remuneration o the

system operator. Te VEC is also responsible or arranging

the uel (in the case o biomass or bio-uel projects) as a con-

tribution rom the project beneficiaries on a rotational basis,

through purchase rom agents such as sel-help groups, or

through raising energy plantations. User charges are collec-

ted by the VEC to meet the operational expenses, and they

also manage the accounts related to the project.

CREDA and WBREDA, however, have developed their ownservice delivery mechanisms, directly taking care o the

O&M through a multi-tier system o maintenance. In the

case o the Sunderbans region, WBREDA has acilitated the

ormation o the Cooperative Society or Beneficiary Com-

mittee. Similar to the VEC, these groups consist o mini-grid

consumers. Te model is also structured similar to the VEC

model, though some specific aspects differ (Figure 4). Te

responsibilities o the cooperative or beneficiary committee

include selection o consumers, planning or the distributi-

on networks, tariff-setting in consultation with WBREDA,

revenue collection rom consumers and passing them on

to WBREDA, and consumer grievance redress. For all the

projects implemented by WBREDA, the capital cost or the

hardware is borne entirely rom the unds available rom

MNRE programmes and provincial government. Further-

more, the local government also arranged the land or the

power plant. Tus, the tariff structures have been designed

only to cover operational and maintenance costs and some

part o the battery replacement cost.

Te rural (Grameen) banks operating in the area act as in-termediaries between the cooperative and individual con-

sumers to collect the bills. Another innovative practice in

the Sunderbans model is the separation o revenue colle-

ction rom plant operation by assigning these activities to

two different entities. Tereore, plant operation does not

get affected because o problems in revenue collection. Te

community model or solar PV projects has been largely

successul, unlike other technologies such as biomass ga-

sifiers, primarily due to the easy management o solar te-

chnologies (Palit and Chaurey, 2011). Yet it is observed rom

the literature that there exist challenges in mobilising addi-

tional revenue to meet expenses such as the replacement o

batteries, large-scale maintenance o plants, etc. Based on a

case study o solar power plants in the Sunderbans, Shrank

(2008) ound that the community management system did

not create adequate incentives or maximizing profit at each

power plant, thus creating problems in covering the costs opower supply.

On the other hand, CREDA developed their own service

delivery model, (Figure 5) placing more emphasis on mana-

ging projects ollowing a top-down mode. While CREDA

also orms VECs that are assigned a limited role, it retains

local oversight and acts as a grievance redress orum. Te

VEC is not held responsible or technical operation and

maintenance. CREDA directly takes care o the operation

and maintenance through a three-tier system o mainten-

ance ramework to ensure trouble-ree working o the mi-ni-grid systems. CREDA selects an operator rom the village

or switching the systems on and off, monthly cleaning o

modules, and to report any aults to the cluster technician.

In addition, CREDA enters into a contract with an operati-

on and maintenance contractor, who appoints a cluster te-

chnician or every 10 to 15 villages. Each technician earns

INR4,000 (US$80) and i desired, a motorbike is provided,

which is redeemed in instalments o INR1,000 (US$20) per

month. Te village-level operator is also paid a fixed month-

ly remuneration. In addition, CREDA officials monitor all

the installations through monthly reports and replace dama-

ged equipment wherever required. For example, an adequate

supply o replacement lamps is kept in stock with each clu-

ster technician to handle lamp burnouts.

In addition to the aorementioned community-led mini-grid

models, the projects implemented by the private sector ol-

low a commercial approach and are purely demand-driven

(Reer to Box 1, Figure 6). For instance, MGP is implemen-

ting solar DC micro-grids using a micro-utility approach

where they design, install, operate, maintain and providethe service to consumers in exchange or a weekly ee. HPS

has developed a ranchisee-based business model or setting

up mini-grids. HPS ollows the BOOM (built, own, operate

and maintain), BOM (built, own, maintain) and BM (built

and maintain) models or providing electricity services. o

some extent, these private initiatives also involve local sta-

keholders in helping with social organisation and achieving

better community responses. Cluster managers appointed to

manage a number o plants (around five to 10) in a cluster

ofen act as co-ordinators between plant-level activities and

the decisions taken at the top hierarchy o the company.


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Figure 3: The VEC model (Source: TERI Compilation)

Figure 4: The WBREDA mini-grid model (Source: TERI Compilation)

Funding Agency(MNRE and State Govt.)

PIA

System Supplier

Power Plant VEC

Consumers

Grant from Central & State Govt.Equity by PIA or Beneciaries

System EngineeringSystem Owner

Revenue;Tariff, Billing,Collection

Electricity

Installation &Commissioning

O&M, LT line Maintenance;System Custodian


Rural Co-operative Society/Beneciary Committee

WBREDA

Zila Parishad/District Council

System Supplier

Power Plant

Rural Bank

Consumers

Funding Support: Grant fromCentral and State Govt.

Land & other Infrastructure

Planning & Co-ordination with

System Custodian

Member of

System Engineering, System OwnerO&M through O&M Contractor

Tariff Collection

Electricity

Installation &

Commissioning


20/32


Figure 5: The CREDA mini-grid model (Source: TERI Compilation)

Figure 6: Mini-grid model of typical private sector company (Source: TERI Compilation)


CREDA

System Supplier AMC Service Provider

Power Plant

VEC

Consumers

Grant from Central & State Govt.Operational Subsidy by State Govt.

System Engineering,System Owner,

Monitoring,Revenue: Tariff,

Billing, collection

Adresses socialconicts, Local

monitoringElectricity

Installation &Commissioning

Provide contract;monitoring

Organise VEC

O&M, LT lineMaintenance

Financing Agency

Husk Power Systems/Mera Gao Power

Technology

Partner or bythe companydivision itself

Consumers

Equity investments;Subsidy from MNRE (optional)

Sells electricity onlight point basis

Sign Contractswith HPS/MGP;Make payments

Responsible forSystem Engineering,Installation &commissioning

Generates, transmits & distributeselectricity (BOOM, BOM, BM)

Trains local people to operate Negotiated tariffs (at or metered) Billing and revenue collection Grievance redress


21/32


Box 1: Private sector-led models providing electricity access Some examples

Interesting variants o business models have been promoted and implemented by private companies. Husk Power Sy-

stem (HPS) has evolved a set o business models to cater to the varying needs o the local people with emphasis on

creation o local entrepreneurship, as well as to expand its business units to other parts o the country and globe. Tere

is a BOOM (Built-Owned-Operated-Maintained) model, where HPS is engaged in setting up plants, procurement oeedstock, and management o affairs, in the entire chain o project development. Te BOM (Built-Operate-Maintain)

model splits up the activities in such a way so that the plant is built, owned and managed by HPS, whereas operation is

lef to local entrepreneurs. Still the other variant is called the BM (Built and Maintain) model, where the plant is built

and maintained by HPS, but owned and operated by local entrepreneur. Tese models have evolved and been applied

rom HPSs past learning and the desire to expand it to other parts o the country and globe.

Another interesting type o business model being pioneered by OMC Power, a new entrant in the mini-grids sector

and advocated by donor agencies like the World Bank, is known as the A-B-C model, where three different groups o

customers, i.e. Anchor, Business groups and Community members (A-B-C), are identified or energy provisioning.

Within the three groups, anchor load is predictable and offers a guaranteed source o revenue or the project developer,

whereas business group and community members are usual customers or the project. For OMC Power, the mainanchor customers are telecom towers. In this regard, OMC has signed an agreement with Bharati Inratel to electriy

its telecom towers through the provision o micro-power or the next 10 years. For commercial establishments and

other community users, OMC Power has devised a concept called micro-power business-in-a-box where community

entrepreneurs are engaged in the village electrification process. Micro-power rom OMC ranges rom a 1.2kW load to

3.6 kW and beyond. For rural consumers, it has a pre-paid system based on subscription, where a rural consumer is

charged a monthly rental o US$2 per month. Te tariff is set by OMC Power based on a commercial approach. OMC

Power also has developed a structured power management system, which ensures the optimal use o energy through

well-designed energy efficiency systems.

Gram Power, another innovative private mini-grid developer, has evolved a business model called pay as you go to

electriy remote rural villages in India through the use o advanced technologies. Provision o electricity is made on

demand. A pre-paid credit model has been evolved not only to electriy villages but also to create village-level entre-

preneurships as well. Local entrepreneurs purchase pre-paid bulk energy credits rom the Gram Power and wirelessly

transer the pre-paid recharge into consumers meter, again on a pre-paid basis rom the consumers. Te meter also has

the provision o indicating the quantum o load that can operate or certain hours. Pre-paid meters charge consumers

on an hourly basis. For instance, around US$1 could purchase 200 hours o CFL lighting or 50 hours o an operation.

Local entrepreneurs earn around 10 percent on every power sale.

Mera Gao Power is again another example o an innovative business venture by the private sector providing low-cost

micro-grid power solutions to rural India. Te company has been able to make it a commercially viable business entity,

largely due to low capital and operational costs, with a projected return o more than 30 percent at a repayment periodo less than three years. Te emphasis o Mera Gao Power is to provide service-specific micro-grids designed to meet

the lighting and mobile charging requirements o rural people. A village-level electrician carries out activities related to

connection and disconnection. Local womens groups are engaged in payment collection. For household electrification,

LED based lights and plug points or mobile charging are provided.

Source: Interviews with respective company officials and field visits.


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FinancingMost o the mini-grids in India have been financed using the

publicly provided capital subsidies by MNRE. All the publicly

supported programmes, like RVEP, VESP, DDG and the off-

grid component o the Jawaharlal Nehru National Solar Mis-

sion (JNNSM) provide varying levels and orms o subsidiesor the projects. In the majority o cases, subsidies cover up to

90 percent o the project cost (up to a predefined maximum

per household), with the balance amount mobilised through

other sources such as provincial government unds, contri-

butions rom the local Member o Parliament or Legislatures,

the corporate sector as part o their social responsibilities,

or rom community contributions. Te consumers own the

household electrical wiring and appliances and only pay or

the services they use. However, in the case o below-pover-

ty-line households, subsidy unds also take care o wirings

and service connections. JNNSM provides capital subsidiesor mini-grids either to meet unmet community demand

or electrification o un-electrified rural areas. On the other

hand, the DDG programme o RGGVY considers technolo-

gy with the lowest marginal cost and extends the subsidy o

90 percent o the project cost and some operational subsidies.

Historically, MNRE programmes have been providing subsi-

dies to meet the capital cost o the projects. However, o late, it

was realised rom the experiences o different programmes that

some orm o O&M subsidies may be essential to sustain the

project operations over a long period, particularly in the case o

extremely remote areas with a poor ability to pay. Tereore, re-

cent programmes such as DDG programme o Ministry o Pow-

er has the provision o not only subsidising the capital cost o the

project, but also in providing some operational costs o up to five

years o project operation. Apart rom publicly supported proj-

ects, the private operators also benefit rom the subsidies as perthe norms o the different schemes. Te details o the subsidies

prevailing under different programmes are provided in able 2.

Private mini-grid promoters and developers largely have

tapped developmental bank loans or have mobilised finances

rom venture capital unds. In addition, in many instances, pri-

vate mini-grid developers have also raised unds rom various

donor agencies (e.g. MGP, Azure Power) CSR financing (e.g.

Gram Power, Sun Edison), prize money (HPS and Gram Pow-

er) and private equity financing, etc. Recently, mini-grid devel-

opers also have started mobilising additional finances rom un-conventional sources like carbon financing, though to a limited

extent. For instance, HPS has been developing a Programme o

Activities or clean development mechanisms to receive carbon

credits. Te major challenge to mobilise finance through this

route is the scaling-up o projects. As decentralised renewable

systems replace very small amounts o kerosene or diesel, the

challenge is to bundle a sufficient number o projects operating

in a region/locality to make it viable or carbon financing. Al-

though there exists reasonable potential or carbon-financing,

current statistics point to the very limited number o mini-grid

projects in the region having received carbon benefits.

Table 2. Targets, ownership structures & subsidies for renewable-based mini-grids in India

Scheme Time frame Target under the scheme Ownership

Finance

Subsidy vehicle Central Financial Assistance

RVEP 2001 onwards Electrification o census

villages and hamlets near

electrified villages that

are not likely to receive

grid connectivity

VEC/Community Capital Subsidy

subject to upper

limits

90% o the costs o various renewable

energy devices/systems subject to

pre-specified maximum subsidy

Maximum CFA per household is

US$3004

VESP 2004-09 1,000 villages to be elec-

trified within the current

5-year plan

VEC/Community Capital subsidy

Operational subsi-

dy or first 2 years

90% o the total project cost

Maximum CFA per household is US$333


DDG under

RGGVY

2009 onwards N/A State Government Capital subsidy

Operational subsi-

dy or 5 years



JNNSM (Off-

grid component)

2010 -2022 20 million decentralised

solar PV systems

Local bodies/State

Government/

Capital subsidy US$1.5/Wp(with battery storage)

US$1.17/Wp(without battery storage)

Source: ERI compilation, 2013.

4 US$1 = INR 60


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TariffsWhile the above section discussed the crucial issue o project

financing, a related and pertinent aspect o project sustain-

ability rests on the designing o appropriate tariffs. While

there exists some degree o uniormity in the quantum o

subsidies provided under publicly supported programmesin India, a visible difference could be singled out as ar as the

tariff structures are concerned or both publicly supported

as well as privately implemented mini-grids. Tis is primari-

ly due to the act that decisions on tariffs are outside the pur-

view o the current regulatory regime, and are determined

through a negotiated process taking into consideration the

prevailing socio-economic aspects o a given area.

Te tariff or publicly-unded projects such as those imple-

mented by CREDA and WBREDA considers the operation

and maintenance cost, including the salary o the operatorsand other related aspects such as the consumers ability to

pay. Te tariff is not necessarily determined based on econo-

mic cost o generation and distribution. For instance, Ulsrud

et al. (2011) observe that WBREDAs designing o tariffs or

mini-grids in the Sunderban has considered several actors

such as government unding, the customer base, income di-

stribution, availability o anchor customers, acceptability o

measures to put a ceiling on consumption, and equity issues

in finding the right balance between affordability and the

economic cost o electricity generation. Interestingly, this

institutional set-up, with an emphasis on local involvement

in the setting o tariffs, appears to have worked well in the

Sunderbans or in areas where people are better off. Additio-

nally, it is also observed rom various studies conducted by

ERI that in areas with a predominantly ultra-poor popula-

tion, consumers tend to pay during the initial months o the

project operation and then start deaulting as electricity is

given less priority compared to other basic needs o lie such

as ood, clothing and health (Palit et al., 2011).

In the case o publicly unded projects implemented by gov-ernment agencies, tariffs or mini-grid consumers are most-

ly based on flat rates as per light point, per month, per con-

sumer. Tis fixed tariff is much easier to administer than a

system o metered tariffs, primarily because o low electrici-

ty consumption. Te number o light points and time o sup-

ply are also usually fixed. Our studied cases reveal that in the

case o WBREDA, the cost o a service connection together

with a fixed initial security deposit is in the range o US$17-

25, and the tariff is about US$2.08 per month or 100W o

connected load. However, the energy service charges differ

based on the connected loads. For instance, a monthly lump

sum energy service charge o around US$2.2 is levied or

120W o connected load and US$1.25 per month or 60W.

Consumers are ree to apply or more than one connection

depending on their requirements and ability to pay.

On the other hand, CREDA levies a connection charge oUS$1.7 or below-poverty line amilies, and US$3.3 in other

cases. Te tariff is a flat US$0.50 per consumer or all hou-

seholds having two light points connected to a mini-grid.

However, almost 85 percent o this amount is paid by the

Chhattisgarh State government in line with their state po-

licy or subsidising the tariff or one light point or all poor

consumers (both grid-connected as well as mini-grid), and

beneficiaries pay the balance amount. A disadvantage o

this flat tariff system, however, is overloading by some hou-

seholds (connecting additional electrical points to those

authorised), which puts extra pressure on the entire system.It was learnt rom our field studies in the Sunderbans that

better economic conditions and rising aspirations led to in-

creasing use o various electrical appliances, thereby putting

additional pressure on the existing systems. However, this

is not always the case. For instance in Chhattisgarh, given

the low economic standards o the beneficiaries, additional

demand was ound to be very limited.

Te privately unded projects consider the economic cost o

generation or project viability and have also developed their

own approaches or the financial sustainability o their proj-

ects. For instance, HPS and Gram Power have ormulated

guidelines whereby installation o a power plant requires the

presence o a minimum number o consumers who are ready

to buy electricity (approximately 400 in the case o HPS and

a minimum o 20 households in the case o Gram Power).

HPS charges a nominal installation ee as well as a basic

connection ee o around US$2-3 per month or two-15W

CFL and a plug point or mobile charging or domestic con-

sumers. ariffs charged or commercial use are a little higher

than the domestic tariffs so that the poor consumers can becross-subsidised5and the project is revenue sustainable. In

the case o MGP, there are connection ees as well as month-

ly charges. MGP charges connection ees o about US$0.80

and there is a weekly charge o about US$0.40. For OMC

Power, a pre-paid system based on subscription decides the

tariff. OMC has devised a system called Te OMC Power

Box, a rechargeable carry-home unit or portable power.

Consumers have to pay in advance to access these systems

5 Cross subsidisation is the practice o charging higher prices to

one group o consumers in order to subsidise lower prices or another

group.


24/32


and accordingly must reveal the amount o electricity they

want to consume in advance. ariffs depend on the amount

o power consumers want to consume, and accordingly the

OMC Power Box is charged to deliver that quantity. Such a

design helps the entrepreneur to address payment deaults.

Te usual monthly tariff is US$2. In order to deal with theuncertainty in revenue collection, OMC Power has contract-

ed some anchor consumers, such as telecom towers, where a

predictable source o revenue is ensured.

Operation and managementOperation and management (O&M) is the critical compo-

nent o the mini-grid models, and has thus received priori-

ty in all the studied cases. Innovative O&M processes have

been developed and operationalised by WBREDA and CRE-

DA and have effectively been integrated to ensure optimumunctionality o the deployed projects. While the O&M o

mini-grids has been traditionally carried out by the plant

operator and VEC, recent experiences show new ways o

conducting this service. It was observed during field surveys

that WBREDA and CREDA engaged qualified technicians

as third parties or the local O&M o the mini-grid projects.

Te technician is either rom the original equipment sup-

plier, or the task is contracted out to local service providers

who engage trained personnel or the job.

For instance, in the case o the Sunderbans, comprehen-

sive annual maintenance contracts are signed or the

management o plant O&M and low tension line main-

tenance. he contractor or plant maintenance has to pro-

vide trained and qualiied operator(s) or the day-to-day

O&M works. he maintenance contract is usually given

to a local contractor, which builds local entrepreneurs-

hip and at the same time ensures a quick and reliable ser-

vice. he companies are bound by the contract to resolve

the problem within seventy-two hours o the problem

being reported to them. Another management innovati-on experimented by WBREDA, which contributed to the

sustainability o the model, is the clear ragmentation o

responsibilities between operator and revenue collector.

he operator, being appointed by the service contractor,

ocuses on the operation and maintenance o the project,

while the responsibility o revenue collection rests with

a dierent person appointed by the village community.

hereore, any shortall in the revenue collection in a par-

ticular month does not aect the operation o the plant.

In contrast, one o the reasons or the limited success o

mini-grids implemented under VESP is because the sy-

stem operator also acted as revenue collector, and in the

case o inadequate collection, the operators were paid less

or not at all. his made them lose interest in operating the

systems (Palit et al., 2011).

CREDA went a step urther and developed a cluster-basedapproach or maintenance to reduce the transaction costs

associated with the operation and management o projects,

since their power plants are located in very remote areas in

the state. It is called the cluster-based service delivery mo-

del or GOLD (Group the partners, Organise their skills,

Allocate load in villages, Deliver service) model, where

the installation is steered by CREDA and the O&M o the

plants is undertaken through a three-tier maintenance set-

up. In general, one cluster consists o 10-15 villages and/

or hamlets. Each cluster has one cluster technician, one as-

sistant to the master technician, and an operator and VECor each mini-grid. Te plant operator looks into the routi-

ne maintenance o plant, such as cleaning modules, battery

checking, wiring/PDN checks, etc. Te cluster technician

is responsible or visiting each village once a month to

execute preventive maintenance and is urther responsible

or resolving any breakdowns. Te cluster approach and

dedicated contracts or post-installation maintenance have

ensured better service and hence more sustainable opera-

tion.

Interestingly, private mini-grid developers have developed

innovative ways o dealing with the O&M o projects by

taking into consideration the conronted challenges. Husk

Power System has developed a similar approach to the

CREDA model. For each plant, an individual plant ma-

nager is appointed, preerably rom the same village. At a

higher level, (i.e. cluster level constituting o 5-6 plants), a

cluster manager is appointed. It is the responsibility o the

individual plant manager to send daily reports to the clu-

ster manager. Tereafer, cluster managers provide the in-

ormation regarding plant operation and management toregional managers. Finally, regional managers report to the

central office. Because o the rigorous monitoring and ma-

nagement systems, plants are reportedly achieving above 90

percent availability. O late, the most advanced technologi-

cal systems have been employed by HPS, like remote real

time monitoring systems, to keep tabs on the perormance

o plants in real time. Given that MGPs business is depen-

dent on long-term revenue flow, they ensure the long-term

operation o each micro-grid they build and operate. Tey

maintain a customer service number to track perorman-

ce problems. Further, to keep systems running, MGP has a


25/32


team o maintenance electricians to respond to each peror-

mance problem within 24 hours.

Community participation and capacity building

Community participation is widely acknowledged as an es-sential ingredient or ensuring equity and the sustainability

o any decentralised electrification. Local participation in

the orm o village energy committees or electricity cooper-

atives has reportedly contributed to better project manage-

ment, though to varying degrees. Te level o engagement o

communities in the operation and management o projects

differ significantly. Ofen, rural communities get engaged

in the project development rom the very inception o the

project planning until the commissioning and operation o

projects. In some other cases, participation seems to be pas-

sive in nature, limited to the upkeep o the project operationand management.

Capacity building, an important ingredient in the succes-

sul operation o mini-grid projects, has been prioritised

in all the studied cases. In the policy sphere also, capaci-

ty building is recognised as vital or the success o these

projects. For instance, the Decentralised Distributed Ge-

neration programme o RGGVY has a clear specification

that it is the responsibility o the project developer to pro-

vide the necessary training/capacity-building to villagers

or running the project. Similarly, the off-grid component

o JNNSM ocuses on sensitising banks to promoting

small-scale solar-based interventions. Experiences rom

the field reveal that the levels o capacity needs differ or

different stakeholders engaged in the project operation and

management. Various training modules have been organi-

sed rom time to time by project implementation agencies/

project developers/state renewable energy development

agencies through a range o training programmes and

workshops, etc., catering to the needs and requirements

o different stakeholders engaged in project operation andmanagement. It was ound that general awareness pro-

grammes are periodically organised primarily or the be-

neficiaries o the projects. Similarly, plant operators and/or

technicians are trained on the technical aspects o project

operation and management, and local community groups/

NGOs are offered a basic level o training to look into every

aspect o project management.

o cite some specific examples o such capacity enhancing

efforts undertaken in the country, it is worth highlighting

the case o the Installers Certification Programme by

CREDA, which is designed or personnel who are specifi-

cally assigned to carry out the installation and commissi-

oning o projects. CREDA also provides reresher-training

programmes every six months or technicians, operators

and VEC members. WBREDA occasionally conducts tra-ining workshops and invites solar experts to share know-

ledge on the available techniques and research and de-

velopment o solar PV technologies or technicians and

operators o mini-grid projects. While most o the VESP

projects have not been perorming well, it has been ob-

served that innovations adopted by selected project im-

plementing agencies or operator capacity-building have

improved project perormance in some projects (Palit,

2011). In some cases, project proponents conducted ca-

pacity-building or the system operators at three stages

beore, during and afer installation through a processo handholding support. CREDA involved a local gasifier

manuacturer to place trained technicians in the villages

or a period o three months rom the commissioning date

to support and provide handholding to the local operators.

Such innovative practices raised the confidence o the ope-

rators to continuously run the system and achieve better

perormance. Tis in turn also helped to build confidence

among communities, acilitating a willingness to pay or

regular and reliable electricity.

Private mini-grid promoters also have considered capacity

enhancements as one o the key ingredients o success. Husk

Power Systems has instituted a University (known as Husk

Power University) to impart technical know-how to local

rural people with limited ormal education. Tis approach

consists o training rural people on issues o plant operation,

maintenance and electrical aspects, with adequate attention

to the cultural milieu and logistical requirements o rural

settings.

While the process o training programmes tends to enhancethe skill sets o many rural youths engaged in the projects,

they also increase their prospects o employability in oth-

er allied sectors. It was observed rom our field discussion

with project developers that in many cases, plant technicians

and project operators leave the project afer a ew months/

years and are engaged in some other activities due to their

experience in the sector and technical skills through train-

ing. Tis also requires scheduling training programmes in

regular intervals to address the scarcity o skilled workers

in the sector.


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Challenges in dissemination of mini-grids 25

Challenges in dissemination of mini-grids

Despite visible progress being made in multiple aspects o

mini-grid development in India, several barriers continue to

derail the speed and magnitude o mini- and micro-grid de-

ployments in the country (Chaurey et al., 2004; Radulovic,

2005). It merits mentioning some o the major hindrances

obstructing the growth o renewable energy centric mini-

grid deployment in the country.

Policy-level impediments include the lack o a long-term

vision or the sector. Te current policy regime governing

the off-grid sector appears to be myopic and lacking in ore-sight, and thereby generates policy-level uncertainties or

prospective investors and project developers. For example,

current policy rameworks do not clearly discuss intercon-

nection standards in eeding excess energy rom a local mi-

ni-grid system to the conventional grid at the lower voltage

level (in areas where a conventional low-voltage grid exists).

Tis has become very important in the context o the DDG

guidelines under RGGVY, which specifies that inrastruc-

ture should be grid-compatible so that the investment will

continue to be useul once a village is connected to the grid.

However, in reality small DDG plants and poor rural inra-

structure cast serious doubts on such compatibility. Further,

the 2013 regulations o the Central Electricity Authority (o-

ering technical standards or connectivity o the distribu-

ted generation resources) lack clarity on the connection o

small distributed generation systems with the distribution

grid network.

Further, under the current policy and regulatory regime,

the determination o tariffs is lef out rom the regulatory

purview. Tereore, retail tariffs are primarily determinedthrough negotiation between the consumers and electrici-

ty service providers. Given the nature o these projects, and

geographical disadvantages associated with these project lo-

cations, per unit capital costs and O&M costs come out to

be relatively high compared to the conventional electricity

systems. Tis, when coupled with low paying consumers, ge-

nerates problems related to revenue generation and thus un-

dermines the financial sustainability o projects. Tis could

have, at least partially, been avoided through the provision

o cross-subsidies. However, under the current legal and

regulatory system, benefits o cross-subsidisation (between

urban, industrial and rural consumers) are only confined to

the grid-supplied consumers and cannot be extended to the

consumers o off-grid systems.

Another related roadblock to the up-scaling and prolierati-

on o mini-grids in India is the lack o adequate investment

in the sector. Most companies active in mini-grid/off-grid

distribution are not able to gain sufficient capital to expand

or up-scale (Jaisinghani, 2011). Given the nascent devel-

opment status o the sector, ormal financial organisationsare generally reluctant to lend to this sector. Te sector is

considered high-risk or investors. Risks associated with

the financing o projects are related to making these proje-

cts bankable. Given these projects operate in rural settings

with poor consumer load profiles and without any long-

term power purchase agreements in the majority o cases,

banks are usually reluctant to finance these interventions.

Further, high upront costs have also been acting as a major

deterrent. Tereore, debt-financing rom banks becomes

a cumbersome affair or private investors and they are also

reluctant to finance these projects without having sufficient

collateral and risk guarantees. Tis is primarily because they

perceive high technological and financial risks, and a lacking

history o profit-making by entrepreneurs. In addition, the

small size o the projects also makes it difficult or the proje-

ct developers to attract equity finance. Again, this is due to

the perceived problems o project scalability and long pay-

back periods. Tis gets compounded by a lack o bankable

business models in the sector, even with the publicly sup-

ported schemes.

Jaisinghani (2011) also argues that non-uniorm technical

approaches, and under-developed non-technical processes

(such as tariff collection and responses to system abuse),

urther hinder access to finance at the early stage o projects

and hamper off-grid electrification. Since all these private

mini-grid developers are new to the field with limited prac-

tical experience (e.g. HPS has been operating or five years,

and MGP or three), they conront several challenges. Tey

are also vulnerable to a wide range o technology-centric

risks. It was elt during the discussion with the project devel-


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opers that some sort o standardisation is required in order

to address the technical problems and bring about unior-

mity in the technology interventions, which will ultimatelylead to minimising the associated technological risks.

Ofen, weak institutional structures and organisational sys-

tems contribute to the poor perormance o the projects.

Cust et al. (2007) argue that even economically viable proj-

ects can ail simply because o an inadequate appreciation

o the importance o appropriate organisational structures

and institutional arrangements. Past experiences also show

that a large number o off-grid electrification projects have

had limited success (especially VESP) because o the dispro-

portionate ocus on technical installation without adequateattention to the long-term sustainability o the projects (Ku-

mar et al., 2007). A typical example is that o VESP projects,

implemented by numerous NGOs and state government

agencies, where there was a lack o clarity on the roles and

responsibilities among different stakeholders that resulted

in sub-optimal community participation and the ailure o

most o the projects (Palit, 2011).

Lighting in a beneciary household, Village Kumedhin, Madhya Pradesh, India.


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Conclusions and lessons learned 27

Conclusions and lessons learned

Based on the experiences o the mini-grid models and a

review o examples, we present five main conclusions or

energy development practitioners, project developers and

policymakers.

InstitutionalTe mini- and micro-grids in India are mainly communi-

ty-centric projects or involve NGOs, and thus lack an or-

ganised delivery approach compared to utility-driven, con-

ventional grid-based supply systems. Te community-basedservice model o the mini-grid projects, while democratic

and decentralised, presents its own challenges. Most o the

community-based projects were implemented on the prem-

ise that the community (through the VEC) or the localpan-

chayatown the project and assume overall responsibility or

management and operations. Tis model may be suitable or

those remote areas where the strength o local governance

is reasonably good and there is better social cohesiveness in

the village. However, as discussed in previous sections, the

VEC is ound to be weak in many cases and group activity

can be minimal. Tis can be a limitation o the current insti-

tutional edifice o managing mini-grids, as implementation

metrics and operational practices differ rom organisation to

organisation, and agencies are not all able to benefit rom a

standardised set o implementation guidelines or protocols.

It is, however, observed that community buy-in and accep-

tance, and the ability to see the benefits, have contributed to

the success o some projects. Te community approach has

been more successul in projects that have ocused on im-

proving the productive uses o electricity, such as in the case

o the Sunderbans and HPS. It is learnt rom these particu-lar examples that collecting revenues is comparatively more

successul where villagers receive some income, either be-

cause o their existing income-generating activities or rom

newly created activities resulting rom electrification made

through interventions. Moreover, divided ownership mod-

els, where operation and revenue collection are conducted

by separate verticals and/or different individuals, seem to

bring better ocus on generation and service delivery.

It is suggested that service delivery models need to be de-

signed and structured in such a way as to recognise the

uniqueness o each region. While technical eatures will re-

quire a degree o standardisation, a uniorm delivery model

might prove counterproductive. Tere is also a need or stan-

dard contracts and implementation processes or the mi-

ni-grid projects to keep transaction costs low. Instead o the

VEC model, alternative service delivery models involving

Energy Service Provider (ESP) or BOOM and BOM models

could be piloted. Te ESP, based on an entrepreneurial mo-

del, could play the collective role o the stand-alone powerproducer, distributor and supplier o electricity and mana-

ge the revenue through payment collection rom electricity

users. Te VEC, with appropriate training and exposure, can

act as a local-level regulator to oversee that the standards

and benchmarks are being ollowed by the ESP or service

providers, negotiate the tariff and biomass prices (in cases o

local sourcing o biomass or a biomass project), and resol-

ve disputes between (or any grievances o) consumers and

service providers. Tis model will also be appropriate or

not-so-remote villages, covering a large number o residen-

tial and commercial consumers to ensure financial viability.

Choice of technologyTe choice o technology and designing their capacity in the

context o renewable energy-based mini-grid projects are

seen to have been influenced by various actors and actors,

such as the geographic and climatic conditions prevailing in

the region, the prevailing policy and incentive rameworks

promoting different technologies at varying levels, the pre-

sence or absence o supply chains or different technologi-es at the local scale, and finally the socio-economic profiles

o households at the very micro level. For example, it was

observed rom field studies that a sufficient and steady uel

supply, especially through local community involvement, is

critical or the sustainability o biomass gasifier-based mi-

ni-grids. Similarly, in the case o solar mini-grids, the stor-

age batteries are ound to be the technically vulnerable part

o the systems, which thereore require proper management


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and routine servicing. Tis has created additional challen-

ges or the whole operation and sustainability o the solar

mini-grids in the Sunderbans region. Tey are difficult to

operate, which creates a need or the advanced development

o operators technical understanding, and urther requires

appropriate drawing o electricity by consumers according

to set norms to extend battery lie. All these challenges il-

lustrate the close interconnections that exist between tech-

nical and non-technical matters, and thus the importanceo ocusing on these connections to obtain viable solutions.

Te study suggests that the selection o technology should

be based not only on robustness, but also on the availability

o knowledge and skill-sets o local people so that afer-sales

service and maintenance can be locally managed and rarely

outsourced.

It could also be observed rom the Indian experiences o

mini-grids that the modularity o technological options has

enabled projects to have different capacities, which have

been determined by the particular needs and requirements

o the local communities. For instance, the Sunderbans and

Lakshadweep Islands, which have very high population

densities, have set up local mini-grids with medium to lar-

ge capacity off-grid solar power plants (more than 100kWp

capacity and covering more than two hundred households

per plant). On the other hand, almost all the mini-grids in

Chhattisgarh are o less than 6kWpcapacity and are mostly

implemented in sparsely populated, tribal habitations.

On the technology ront, another pertinent issue is related

to the risk o obsolescence. Tis holds paramount importan-

ce in the context o grid-reaching in the off-grid locations,

which renders the projects obsolete. However, it appears

rom the policy sphere governing the off-grid energy sector

in India that there have always been efforts to accommoda-

te new and emerging technologies with changing needs and

priorities. In its early phases (1996-2002), most mini-grids

were designed to operate only in stand-alone mode, though

they were using state-o-the-art inverter-converter systems

o the time. With the launch o the DDG scheme under Ra-

Distribution line in village Rampura, Madhya Pradesh, India.

7/21/2019 Renewab

renewable energy-based rural electrification: the mini-grid experience from india

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