Currently, over 300 million Indians are without access to electricity.
One of the primary reasons for poor electrification is the limited reach
of the power grid. Remote locations and low incomes of the rural
population however make grid extension uneconomical. Small-scale systems
can be an alternative solution. This is why the government's newly
announced 100 GW solar power target under the Jawarharlal Nehru National
Solar Mission (JNNSM) by 2022 includes an ambitious 20 GW from off-grid
systems.
These include solar home lighting systems (SHS), solar
lanterns (SLs), micro-grids and pumps. While the first two are simple to
implement, they primarily only provide lighting. Micro-grids are more
suitable to encourage income-generation activities.
Capital costs
of solar micro-grids with storage systems are about Rs 2 lakh/kWp and
the levelised cost of electricity (LCOE) is Rs. 19-24/kWh. This is high
compared to Rs. 6-9/kWh for large grid-connected and rooftop PV (RTPV)
systems. It is however cheaper compared to the costs involved in
extending the grid to remote areas, which varies between Rs. 26-228/kWh
if the village is 5-25 km away from the grid, as shown by a Princeton
University study in 2014.
Off-grid systems face major obstacles
like high capital costs, poor subsidy disbursal, minimal guarantee of
returns and operation and maintenance (O&M) challenges. Varying
consumer locations and preferences render a generic approach unfeasible.
Thus, increasing the off-grid capacity by almost 85 times (from 230 MW
to 20 GW in seven years) will require meticulous planning and
innovation.
Policy Gaps
Multiple decentralised
electrification schemes from various ministries have led to unclear
directives and mixed results. Complicated processes have led to slow
capital subsidy disbursal. Streamlining the associated processes under
one ministry would provide transparency and efficiency.
In the
past, subsidies on diesel and kerosene made relatively more expensive
solar systems economically unattractive. But with deregulated diesel
prices and plans to scrap the kerosene subsidy - and the global decline
in solar prices - could make solar solutions increasingly economical. A
recently proposed scheme entails giving rural households a choice
between cash subsidies on kerosene or upfront capital subsidies for SHS.
Once in effect, the scheme could be a game-changer for the off-grid
solar sector.
Financial challenges
Established developers
prefer investing in large-scale and RTPV systems because of easy access
to finance, security of payment and simple O&M. Raising finance for
off-grid systems is a challenge with a dearth of low interest loans.
Benchmark prices of central subsidy schemes are often considerably lower
than actual costs of project implementation. This leads to disinterest
in tenders. Schemes to reduce the cost of debt and increase returns on
investments should be devised. Public-private partnerships with rural
entrepreneurs as well as community and electricity supply company
(ESCOM)/government owned projects can be encouraged.
Based on the
model followed, appropriate soft loans can be availed. To encourage
private developers, incentives such as tax holidays and partial risk
guarantee (from the state government) can be provided. Corporate social
responsibility (CSR) investments of large companies should be dedicated
to off-grid projects, as they tend to have low internal rate of return
(IRR).
Often, systems under capital subsidy-based models fall
into disuse due to lack of long-term financial incentive. Hence, apart
from interest rate subsidies, revenue models such as generation-based
incentives (GBI) should be implemented.
The lack of a roadmap for
rural electrification makes villagers unwilling to pay for expensive
electricity in the hope that the grid will reach them. The same
uncertainty makes developers reluctant to set up a system. The
government should mandate that a micro-grid based system is
grid-interactive and create a risk mitigation plan where developers can
be compensated if the grid is extended to their area of operation.
Technical Challenges
Micro-grids
need to counter intermittency. Not only does this add to the cost but
also leads to maintenance issues. Innovative storage mechanisms (such as
flow batteries instead of lead-acid and lithium ion technologies) and
hybridising solar plants with either wind, pumped hydro or biomass can
make load balancing more robust.
As skilled human resource is
scarce in remote areas, O&M poses a huge concern. Local
participation and capacity-building should be undertaken. Solar off-grid
training programmes should be conducted in industrial training
institutes and similar local bodies, which includes the 'training of
trainers'.
The present lack of standardisation for micro-grid
systems makes verification of designs and performance parameters
uncommon. The government should establish guidelines and enforce strict
quality standards for the sustainability of off-grid systems.
Effective
planning of small-scale projects requires site-specific pre-feasibility
analysis and assessments of local household and agricultural demands.
This can lead to added expenditure but helps in checking long-term costs
associated with maintenance.
If these challenges are addressed
in a structured and phased manner, then the 20 GW target for off-grid
solar power is achievable. Attaining success in this sector will however
be an arduous task compared to grid-connected systems.
(11.02.2015
- Vaishalee Dash, Pooja Vijay Ramamurthi, Saptak Ghosh are with
Bengaluru's Center for Study of Science, Technology and Policy (CSTEP).
The views expressed are those of CSTEP. The authors can be reached at
[email protected], [email protected] and [email protected])
