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Off Grid Energy Independence
Posted on March 08, 2018 by Dr Peter Harrop

India - off grid economics debate

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India is one of those countries where grid electricity is often more expensive to produce than off grid excluding energy storage but grid electricity is much cheaper to the customer due to massive subsidies not available for minigrids. Grid extension is keeping up with population growth unlike the situation in Africa where population is often across vast areas. On the other hand, the Indian grid is not very green whereas off grid is typically 100% zero emission and India has a huge problem with polluted air from power stations and vehicles. The country is therefore instituting a big push to pure electric vehicles and cleaning up electricity production and off grid and fringe-of-grid electricity production has to be a part of that. Now the debate swirls round and round. We show examples below.
 
The national grid will reach last mile?
Sun-Connect is provided by Stiftung Solarenergie - Solar Energy Foundation. Its articles reflect opposite opinions, which is good. One, "Solar power push lights up options for India's rural women" conveyed powerful anecdotal evidence of the value of minigrids in rural electrification. In this article, they used the Government of India's definition of a "mini grid" - a discrete localized grid with a generation capacity of at least 10kW and less than 100kW. Another article commented that the story is inspiring and is convincing that mini grids have the potential to impact lives but argues that it is misleading concerning the ability to reach the last mile communities in rural India and the actual cost to the customer. It pointed out that the article implies "incorrectly" that minigrids can help fill in rural India's electrification gaps by reaching last mile communities.
 
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Minigrids best for mid-sized communities?
Smart Power India (SPI), which finances OMC and other mini grid operators, released a report "Expanding Opportunities for Renewable Energy-Based Mini-Grids in Rural India" in which it determined minigrids are only viable in villages and towns with more than one thousand households. In its "About Smart Power India" publication, SPI points out that 99.5% of such villages are already electrified. The minigrids SPI supports, therefore, reach communities which are already grid connected, a battery making them fringe-of-grid in some cases - using grid only as backup - not last-mile communities.
 
Small unelectrified communities
There are many unelectrified communities in India too small to meet a minigrid's minimum customer base requirement. Most unelectrified, last-mile communities in India are hamlets, of which there are over 1 million in India and 160,000 in the state of Uttar Pradesh alone. Most of them are smaller than 100 households, never mind 1,000 households. Within 15 kilometers, there are no clear off-grid communities large enough to support a minigrid at current costs. However, there are approximately 100 off-grid panchayats which contain more than 500 off-grid hamlets and thousands of off-grid households within 15 kilometers. These are the last mile communities and they, by SPI's own findings, cannot be served by mini grids.
 
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Contrast
This is in some contrast to the global situation, where one billion people with no grid electricity are gradually being served off grid and the more prosperous countries have plenty of people able to afford a Tesla solar house with Powerwall battery or equivalent, their equipment providing useful backup after collapse of grid poles and wires from increasingly violent weather. Koen Peters, executive director of the Global Off-Grid Lighting Association (Gogla), recognises a further billion worldwide with an even more unreliable supply, losing a few percent of availability. He says these numbers mean there is a huge market for off-grid renewable energy, especially in places where it may not be economically viable to get hooked up to a grid. "We've only scratched the surface of the available market," he says. This burgeoning interest in leapfrogging centralised energy distribution, and enabling local storage, is borne out by the figures. Since 2010, off-grid solar cumulative sales have grown by around 60%, according to Gogla.
 
Last mile
In India, Smart Power for Rural Development" is a $75 million initiative launched by The Rockefeller Foundation in 2015 to address the 'last-mile' energy gap. Nonetheless, over time SPI found that the minigrid approach could not reach the last-mile hamlets, the communities that remain off-grid today. SPI opted to change its mission, and in 2017, in its "About Smart Power India" publication, SPI offers a new vision: "To spur economic development in villages through access to reliable electricity provided by renewable energy minigrids."
 
References to electrifying last-mile communities has been removed from the SPI mission statement, though the Rockefeller Foundation still maintains this language on their website. SPI now aims to provide more dependable power to electrified communities. This is a logical response and consistent with the evidence they have uncovered in the past few years: mini grids cannot provide power to unelectrified last-mile hamlets but can provide electricity to larger grid-connected villages and towns which do not receive dependable power 24 hours a day.
 
Significant social value
Sun Connect is careful to say, "This is not a knock on minigrids. It should be noted that significant social value has been measured by building minigrids in already electrified communities which justifies mini grid replication in other towns and large villages across North India. However, readers should simply understand that mini grids cannot penetrate deep into rural India. " IDTechEx disagrees because this seems to ignore the rapid cost reduction of photovoltaics and its future viability in solar roads and windows, even the contribution of wind power and the tumbling cost of batteries. See the IDTechEx reports on smart roads and on energy independent urban infrastructure www.idtechex.com External Link.
In a recent Hystra report, the cost of power from mini grids was compared to power from the India national grid and found to be more expensive. Figures are in US$ per year excluding energy storage.
Data Source: "Reaching Scale in Access to Energy", Hystra, 2017
 
The national grid is heavily subsidized and mini grids at best receive debt below commercial terms from SPI. Inevitably the cost to customer will be more expensive from mini grids than the national grid. This would be expected to change if the same subsidies to the national grid were applied to mini grids, as the above graph shows that minigrid prices are below the unsubsidized cost of grid power; but realistically public subsidies are likely far down the road as the longevity of a minigrid's lifespan and relevance have yet to be proven. The premium pricing of power from mini grids is nothing to be ashamed of, but again those interested in the sector should be aware.
 
Minigrids play an important role in providing dependable power to grid connected communities with intermittent and undependable grid power. Communities, families, and students all benefit without question. There is no need to overstate the role of minigrids, claiming they can currently provide power cheaper than the grid and competitively reach last-mile, unelectrified communities. Their actual merits alone are strong enough to stand on. On the other hand, compensating for nonexistent, poor or costly grid power may not be the most scalable solution for India's microgrids according to a new report from US-based research institute the Brookings Institution."
 
This is because, as India's grid improves, the model of microgrids filling in for low-quality or unavailable grid power may become obsolete according to Rahul Tongia, Energy and Sustainability Fellow at Brookings India and author of the report titled "Microgrids in India: Myths, Misunderstandings, and the Need for Proper Accounting". While reliability and quality of power supply have been the traditional drivers for microgrid installation, once grid power is available it will invariably be cheaper, the report notes, adding that while renewable power is cheap, adding battery energy storage or other reliability technology makes it more expensive than grid power.
 
Then there are 'last-mile' costs for wiring to the home, which apply to both grid and microgrid power. These can be at least INR5000 ($77) per home, the report says, and even higher for sparser or more remote locations and hilly regions. And the cost of metering - around INR650 even for non-smart meters - must also be factored in.
 
In addition, getting the size of a microgrid right is a challenging proposition where oversizing means costs are not covered and undersizing means occasional higher demand is not provided for. As well as being cheaper, grid power offers much more flexibility, the report says.
 
For more see the IDTechEx report, Off Grid Zero-emission Electricity 2018-2038: New Markets, New Technology Roadmap and attend the conference, Off Grid Energy Independence at "IDTechEx Show!" Berlin April 11-12. See www.idtechex.com External Link
 
Learn more at the next leading event on the topic: Business and Technology Insight Forum - Cambridge December 2018 External Link on 4 - 6 Dec 2018 at Cambridge, UK hosted by IDTechEx.
Dr Peter Harrop

Authored By: Dr Peter Harrop

Chairman

Posted on: March 8th 2018