Naman Sanghvi

India’s Solar Power Surge : Low interest loans and government subsidies could electrify off-grid, microgrid sector

In India, 35.5 percent of the population (nearly 400 million people as of 2011) has no access to electricity, and per capita average annual domestic electricity consumption is 96-kilowatt hours in rural areas and 288 kWh in urban areas (as of 2009), as compared to the global average of 2600 kWh. While 80 percent of villages in India have an electricity line/connection, only 52.5 percent of rural households have access to electricity. Some 90 million households still rely on expensive, unsafe, and polluting kerosene for light and cooking.

Given the scattered nature and remote locations of many villages; bringing the grid to every village is not only a highly expensive affair, but also a technologically inefficient process, and an operational and implementation nightmare.

For a country like India, off-grid and micro-grid solutions are proving to be a much more feasible option. Implementing micro-grids and off grid generation projects, though challenging, is very much possible, and have already been tested and proven in India. For instance, as of May 2012 in the state of Chhattisgarh alone, 1,439 remote villages have been electrified through micro-grids that reach out nearly 58,000 families. In fact, the power ministry aims to provide power to 574,000 households countrywide in the next five years.

Solar technologies – one of the best solutions to light up and electrify rural India

Unlike biomass and wind, solar is one such energy resource that is amply, abundantly and adequately available uniformly across India. With 300 clear sunny days, India has one of the best solar resource potential, globally. With the amount of solar energy India receives in a year, even PV panels with very low efficiency of only 10 percent can produce energy a 1,000 thousand times more than the entire country’s 2015 projected electricity demand.

Solar off-grid solutions are ideal for rural India because they provide:

  • local production from energy resource is possible

  • reliable uninterrupted power supply

  • decreased transmission and distribution losses

  • reduced delivery costs and decreased costs of purchase for end consumer

  • promotion of a local servicing and product market

  • substitute for expensive and dangerous fuel like kerosene

According to a World Resources Institute/IFMR Research report, off-grid energy is a $2 billion-plus market that is pretty much untapped (including electricity generation and distribution, and clean energy products). The opportunity is huge and many private companies have come up with unique business models and technologies, targeted at rural operations and BoP consumer base. Some of them include:

  • SunEdison, a leading solar energy company recently installed a 14kW solar powered microgrid in a village, which provides power to 400 residents who pay as little as $1-$1.50 a month. In fact SunEdison hires people locally to manage the facility and collect payments, and has had no payment related defaults/issues or theft cases, since commencement of operations. In the coming 18 months, SunEdison plans to install 30 more such small solar micro-grids.

  • Mera Gao Power (MGP) is another company which develops low cost solar powered microgrids and supplies electricity to villages. As of January 2013, MGP has set up microgrids in 155 villages and light up lives of 3,600 households.

  • Simpa Networks has addressed the burden of high upfront cost of solar by coming up with an innovative payment mechanism – like a prepaid mobile phone card, where users pay to use the product, which is also treated as repayment for the product. Repayments range from as much as INR 50 to INR 1000, thus allowing consumers to repay over a two- to three-year period. Simpa is targeting selling 25,000 such systems by 2014.

  • One of Simpa network’s biggest partners is another path-breaking company in the field of solar systems – SELCO, which has sold thousands of solar lighting systems in India to rural and BoP customers. (Pictured left: Customers test out Simpa Networks’ technology).

  • Gram Power, another company founded by University of California, Berkeley graduates is all set to power 20,000 homes and 1,000 telecom towers in India this year at less than 20 cents /per day, through a unique model which comprises of generation through solar and a proprietary smart distribution system

And, if you’re a you are a solar technology manufacturer, service provider, or an equipment provider of components like batteries – access to low-cost financing has never been better.

The government’s role in promoting solar off-grid solutions

The Indian government also is giving off-grid market also a strong push. In 2010, it announced the Jawaharlal Nehru National Solar Mission (JNNSM) – by far one of the most ambitious plans, globally, to proliferate quick commercialization and adoption of solar technologies. JNNSM was aimed at developing the solar energy sector in India and create a policy framework to:

  • reduce costs of generating electricity from solar and achieve cost parity with grid energy by 2022

  • by 2022 achieve a cumulative capacity of 22,000 MW (at approximately Rs 8-10 Cr/MW, and an overall investment of USD $19 Billion) of grid-connected and off-grid solar installation (2 GW off-grid installation), from a meager cumulative solar installation of 17.8 MW as of 2010.

  • accelerate penetration of affordable solar products across urban and rural India, and off grid applications like rural electrification/lighting and rooftop installations

  • create a solar associated private domestic manufacturing and services industry

With Phase I ending in 2013, MNRE the Ministry of New and Renewable Energy released draft guidelines of Phase II, offering industry an insight into the future road map for the solar sector. Apart from setting a target of achieving an additional nationwide capacity of 9,000 MW of grid-connected solar by 2017, Phase II set ambitious targets for solar technologies and solutions in rural and BoP markets. Some key highlights are:

  • Achieve 1,000 MW of off-grid solar installed capacity by 2017

  • Reach 20,000 villages locally, through set up of micro-grids and off-grid generation projects

  • Provide more than 1 million off-grid solar lighting systems like solar lanterns and home lighting systems, a majority of which will be for the rural and BoP consumer base; and facilitate scale up to 20 million solar lighting systems by 2022 (as of 2012, nearly 4,600,000 solar lanterns and 861,654 solar powered home lighting systems have been installed across India)

  • Target setting up 25,000+ solar run pumps by 2017. These pumps are primarily used in rural areas and by farmers for drinking and irrigation purposes. (India has nearly 5 million diesel run pumps in use currently, and as of FY 2012, has 7,771 solar run water pumps installed)

  • A boost to provide training to rural and semi-urban populations – specialized courses will be introduced in 100 ITI’s and 100 diploma level institutes, which will provide specialized solar specific skill training. A total of 25,000 village technicians will also be trained

As per the draft guidelines, capital subsidies, incentives and attractive loans will be made available to projects and small and medium scale companies (throughout the product chain). Up to 90 percent of the cost of off-grid generation systems can be covered through the various support schemes. Special support would be provided to solar lanterns and solar home lighting systems up to 3 kWp and pumping systems up to 5 kWp. Financial institutions that lend for off-grid solutions like solar lights, will also be incentivized under this policy. In Phase II, focus would be more so on capital subsidies rather than interest subsidy schemes. Phase II also will focus on developing/setting quality and performance standards for solar equipment and products, which will be used for more efficient allocation of subsidies.

It’s still too early for a comprehensive assessment of how well the JNNSM has done to spur the solar off-grid industry across India, until the final guidelines detailing modalities and operational intricacies are released. However, it is clear that government initiative and policy like the JNNSM will play a significant role in attracting private investment and nurturing sustainable business models in the off-grid energy market.

Naman Sanghvi works in business Development in the renewable energy department of CLP Power India – a power utility based in Mumbai, that is one of the largest foreign investors in the Indian wind energy sector.

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? SELCO: A Business, Ongoing Case Study in Solar-Powered Social Impact

? Energy for the BoP Made ’Simple’

Energy, Technology
infrastructure, solar