By Riya Saxena, Associate Asha Impact
India has set an aggressive goal to generate 175 GW of renewable energy, which includes 100 GW of solar power by 2022. The government’s commitment to achieving this target is evident, given that in the past three years, India’s position on the World Bank’s electricity accessibility index has jumped 73 positions, surpassing numerous developed countries and, more than 10GW of solar capacity has now been developed — starting from a low base of 2.6 GW. Furthermore, the government’s focus on utility scale renewable energy power plants has driven the price of solar energy to an all-time low of Rs 2.62, making it cheaper than coal!
Where Mini-grids Fit In
Despite the laudable efforts being made to produce renewable energy, at present, access to energy remains a pervasive problem. Around 240 million Indians across the country, especially in rural areas, still do not have access to reliable power from the national grid. To bridge this gap, numerous private Energy Service Companies (ESCOs) that produce 10 to 50 KW of power through either solar and/or biomass plants have started distributing electricity to energy starved remote areas, and also, villages that are a few kilometres from capital cities. These are referred to as mini-grids.
Mini-grids are a significant means to providing energy access; yet, they have not scaled to a commercial level. This is partially due to the business model challenges operators are facing- high upfront capital expenditure with low price margins leads to a very long payback period of muted returns. But the key risk that the mini-grid market is facing, when it comes to expansion, is government subsidized tariffs that significantly undercut the ESCO’s profit margins. Nonetheless, ESCOs with local resources and superior customer servicing facilities (metering, billing, collection) are building robust decentralised distribution management systems to tackle the inefficiencies of the distribution companies (DISCOMs). In fact, there is an increasing acceptance of the view that decentralized mini- grids and the centralized main grid, can jointly serve the rural population rather than compete with each other.
Exploring Interaction Between Mini-Grids and National Grid
Interconnection models between the mini-grids and the national grid are emerging as a valuable pathway to introducing innovation into the electricity system and subsequently, providing electricity to the last mile consumers. In an attempt to develop a framework for an integrated electricity system, Asha Impact, in collaboration with Okapi, Rockefeller Foundation and Shakti Sustainable Energy Foundation, lead research on the commercial, technical and regulatory implications of the different models for interconnection. These models are designed to cater to the energy requirements of areas that are
i) Unlikely to ever get the grid
ii) Expected to get grid connectivity in the near future and
iii) Already get power from the national grid and ESCOs
What We Learnt
1. A comprehensive interconnection framework would account for the evolving power supply dynamics and economics of the mini-grid operators and distribution utilities.
In the near term, it is realistic to expect that gaps in the grid supply to rural areas will persist. In such a situation, an interconnection model where the mini-grid partially imports electricity from the national-grid is ideal, as the ESCOs would incur minimal expenditure to make their infrastructure compatible with the grid. As per this model, the ESCO would become a bulk customer of the DISCOM and import power to charge its battery bank, while continuing to supply to its customers through its own power distribution network (PDN). However, there is ambiguity on whether mini-grid operators would be allowed to set consumer tariffs in such an arrangement.
In contrast, in the long run when the national grid’s power supply is significantly improved, the interconnection with partial export model (ESCO interconnects its mini-grid to the main grid and exports only the excess power generated, beyond what is consumed by its customers, to the main grid) would be suitable. The ESCOs are paid the feed in tariff by the government and have control over consumer tariffs. It would be beneficial for both — the mini-grid operators (they would have to provide power for lesser hours) and the national grid operators (they would have an alternate source of power). Although, clarity on regulations around intentional islanding, which allows mini-grids to safely provide power to consumers during periods of off loading is urgently required to operationalize the model.
2. The point of physical interconnection has a significant impact on the cost of the model.
There can be two points of connection, either on the Low Tension Network (LT) (closer to or on the mini-grid, which can reduce transmission losses and lower the cost of interconnection) or at the 11 kv Network (away from the mini-grid).
Source: Beyond Off- Grid, Integrating Mini-Grids with India’s Evolving Electricity System, 2017
To connect on the LT line, there should be a sufficient power deficit to take exports, infrastructure to manage additional generation and live rural feeder lines. Unfortunately, the last two conditions are typically not met in rural areas. The second model, where the connection would be farther away from the mini-grid, requires heavy capital expenditure (~ INR 15 Lakhs) by the ESCO, which would subsequently hamper the economic viability of the interconnection models.
Thus, smooth implementation of the interconnection models would be dependent on a number of factors: technical and procedural certainty of the interconnection point for mini-grids, ability to create intentional islanding, limits on mini-grid penetration, comprehensive equipment and infrastructure guidelines specifically for ESCOs, and compensation for the full range of services provided by mini-grid operators.