Powering the BoP: Micro-grid payment and metering solutions offer promise in India
Editor’s note: This post originally appeared as the second of a two-part post on the Sankalp Forum Blog. Part I highlighted the need for decentralized energy solutions, and various products and services offered by private enterprises to meet the energy needs of rural poor households.
Commercial micro-grid enterprises with solutions to provide reliable power supply are gradually building trust among low-income consumers. And mechanisms to enhance payment and collection are a big component of this effort.
Mera Gao Power (MGP), which operates in off-grid villages in Uttar Pradesh, charges INR 100 per month for infrastructure maintenance and services. Consumers pre-pay on a monthly basis, and have the flexibility to subscribe and unsubscribe when required. Additionally, they can now replace sooty kerosene-fueled lamps with clean, smokeless and reliable energy for the same price. MGP’s staff collects payments on a prefixed date each month. The solar micro-grid is linked to computers that monitor energy use and can cut off power to households automatically if excess electricity is drawn.
Another enterprise that leverages computer technology for its micro-grid is Gram Power, which provides smart solutions in remote villages in Rajasthan. With a pay-as-you-go model, the enterprise uses smart metering technology and allows consumers to purchase power in a prepaid mode. Gram Power’s smart micro-grid also minimizes power theft and payment defaults.
DESI Power follows a community approach to ensure payments are made promptly by households in the village. They arrive at electricity rates (about INR 10-15 per kilowatt hour) after consultations with the community. Over time, DESI Power has realized that consistency in power supply and its impact on people’s incomes is directly linked to revenue collection in villages. This, they feel, eliminates the need for a prepaid metering system. Aklavya Sharan, executive director of DESI Power notes, “Villagers don’t often have money to recharge or pay for the electricity, but they do require power to run irrigation pumps – and if there is no power supply, then the company ends up losing customers.”
Challenges to Breaking Barriers through Technology
India is considered to be the third largest market for smart meter technology after the United States and China. The government believes India will need to install at least 100 million new meters that will provide more control over electricity usage. For micro-grid enterprises seeking to keep costs low, installing meters in villages would further add to input costs. Moreover, in low and variable income settings, enterprises using a prepaid metering system run the risk of customers falling short of money to recharge for electricity. Thus, these enterprises can neither predict power usage nor secure customers for a length of time, adversely impacting revenues. Having said this, the long term payoff of using smart meters in ensuring greater power supply efficiency is significant.
“Hiring the right staff for monthly collection of payments is another challenge,” says MGP’s co-founder Nikhil Jaisinghani. For enterprises operating on low margins, even a slight increase in cost impacts viability; hence collection agents must collect payments from a majority of the households in one trip and avoid multiple trips. A 2013 study by New Ventures India on micro-grids in Uttar Pradesh and Bihar highlights challenges that Minda’s collection agents face:
“In one month, the family would have spent all its disposable income on a wedding and in another month the man of the house may simply not be at home. After a few months, when the debts have accumulated, the customer requests a discount. Once the discount is given, the lower figure becomes the norm.”
However, DESI Power has witnessed a change in people’s attitude. “This change hasn’t happened overnight, and required close interaction with the community,” Sharan says. It takes time to enhance village capacity – and once jobs and income levels have improved, people are automatically convinced to pay for electricity. To increase the efficiency of micro-grids, DESI Power will be piloting a “Power System Management Module” in Bihar that will not only monitor, but also control electricity generation and distribution, and identify power thefts.
Clean energy micro-grid enterprises are likely to move towards the mainstream power generation and distribution industry in India, with substantial investments and advancement in technology. In order to achieve this, they will increasingly rely on enabling technologies for electricity metering, measuring and billing. While significant successes in the intersection of technology and micro-grids could take years, the key is to understand the scope of success of micro-grid projects and the context of their failure in order to ensure that current efforts of entrepreneurs are sustained in the long term.