The country has targets to integrate 500 GW of renewable energy into the country’s grid by 2030. An integrated model that includes grid-based power supply and decentralized or off-grid power would be an efficient and cost-effective way to help achieve this target in an accelerated manner and end energy poverty faster.
A recent study showed that two-fifths of rural consumers in India are not satisfied with services from state-run power utilities, while one-third of rural businesses remain without grid connectivity. At the same time, DISCOMs continue to struggle with poor fiscal health – a Reserve Bank of India report pegging these utilities as the single-biggest burden on state finances – raising serious questions about their ability to improve services to rural households and businesses.
The financial losses reported by state-level DISCOMs in the financial year 2019 was up 4.4 percent from the previous year, and owe nearly Rs 412 billion (US$ 5.72 million) in outstanding dues to power generators. The aggregate external debt of power utilities is estimated to increase to Rs 2,600 billion (US$ 36.49 billion) by the end of the financial year (March 2020), calling for serious reforms in the power sector.
Hybrid DISCOMs are the next generation of integrated energy systems that combine private sector solutions like microgrids and minigrids with the public grid-connected power distribution network and can address inefficiencies in the current infrastructure, effecting a win-win for the utilities as well as rural consumers.
The government recognizes the need for this shift and is actively encouraging a decentralized model of power distribution. RK Singh, Minister of State for Power and New and Renewable Energy said in an interview that DISCOMs would have to supply power through franchisees or multiple licensees in order to access central
government assistance or loans.
Niti Aayog’s CEO Amitabh Kant speaking at a recent event said: “DISCOMs are not only inefficient but are the biggest hurdle for microgrids. The government needs to ensure that provisions are made by DISCOMs for the sale of microgrid power, so that they become catalysts for the growth of microgrids in India.”
The Ministry of New and Renewable Energy (MNRE) has published draft guidelines that aims to provide a facilitative framework for the development of decentralized solar power plants in India.
The private sector, too, is ready to step up. Earlier this month, Tata Power and The Rockefeller Foundation announced a partnership to build 10,000 mini-grids and provide clean power to 5 million households over the next decade. They claimed the entity, TP Renewable Microgrid Ltd would be the world’s largest microgrid developer and operator, and would help support 100,000 rural enterprises, creating 10,000 new green jobs and providing irrigation for over 400,000 farmers.
In August, Tata Power Delhi Distribution Ltd (TPDDL), the capital’s power utility that serves over 7 million consumers, began an assessment for the potential of integrating decentralized renewable energy (DRE) into Delhi’s power grid. A research study, in partnership with CEEW, on the impact of increased solar rooftop deployment on the quality of power supply and the feasibility of agricultural solar micro-grids will be undertaken to inform the company’s plan to meet its future power needs using solar and other DRE technologies.
Such initiatives are being piloted and include community-level participation. In Odisha, Smart Power India supported the Central Electricity Supply Utility to develop a Model Distribution Zone in a selected area to demonstrate improvements in electricity service by enhancing reliability and customer services. The learnings and impact from this initiative will be further used to address challenges in enhancing electricity access, providing high quality electricity service and stimulating demand for electricity in rural areas. The program will measure the outcome based on these indicators, aimed at improving the viability of electricity distribution services in rural areas of the state.
Under this partnership, 82 community-based micro-franchisees were set up at the village level, using local women’s self-help groups, who will be engaged in metering, billing, collection, and customer service pertaining to electricity supply. Support of industry players will be taken to bring in best practices, technology and innovation and capacity building to the DISCOM and the community, while the overall ownership of operations continues to remain with the DISCOM.
“This initiative aims to design a financially viable roadmap to ensure electricity supply in rural areas, by providing reliable and quality power to consumers backed by high quality customer service, which will lead to higher electricity consumption,” says Samanwit Biswal, Program Manager, Smart Power India.
Emerging economies have an unprecedented opportunity to accelerate access to energy by integrating utilities with a range of private, distributed solutions. If this is done in a holistic, comprehensive way, allowing the grid and decentralized systems to better collaborate, the results could be far-reaching.
According to the Renewable Energy and Energy Efficiency Partnership (REEEP), clean energy mini-grids could serve at least 36.5 million people in Bihar and Uttar Pradesh alone and mitigate greenhouse gas emissions of up to 122 million tonnes of CO2 between 2020 and 2035. The International Energy Agency (IEA) pegs mini-grids and off-grid installations as the lowest-cost options for over 70 percent of new electricity connections.
Debajit Palit, Director – Rural Energy and Livelihoods, TERI adds, “We also need to have decentralized management so that consumers receive high quality last-mile service delivery”.
Whoever is the supplier – whether grid or off-grid – they need to win the confidence of the consumer. In the existing grid-connected system, once a household is connected and a meter is installed, ideally the household should receive a bill every month. However, in reality, the reading of the meters and issuing of bills takes about 6-8 months in some cases, by which point consumers receive bills in arrears and are unable to pay that high an amount.
This results in their connections being cut. Similarly, the capacity for ongoing maintenance to these regions also sometimes falls short, and it could take weeks or months for maintenance personnel to arrive at the village to fix a faulty transformer. This is an important part of last mile service delivery, and can only be improved through decentralized management, and greater engagement with mini-grids at the local level.
In 2016, private developer Mlinda installed mini-grids in Gumla, Jharkhand. The company claims the initiative impacts 4,096 households with a 23 percent average increase in income. Prior to this, 32 percent of these households used the national grid as their primary source of lighting, and the rest relied on expensive fuels for their energy needs. These community-based solar grids, each with a capacity of 20-30 kWp, equipped with remote monitoring, high-level lightning protection systems, and smart meters could help achieve financial, social, and environmental development.
Existing power utility models – monopolistic, unidirectional, and siloed – are unlikely to be profitable or sustainable, especially in developing countries, and have not been successful in ending energy poverty. However, they can be powerful partners in this process by leveraging the comparative advantages of centralized and decentralized energy to create a robust, integrated system that facilitates improved service delivery by allowing a range of energy companies to come together and transform the power sector.
Decentralized solutions and centralized power providers need each other. Power utilities are well-aware of the challenges in scaling-up infrastructure, and the realities of regulatory oversight, and can help the private sector grow. At the same time, private players have an insight into the market dynamics are the local level, access to data and technology, and the possibility of last-mile connectivity to areas that are hard to reach by the grid.
On their own, neither utilities nor decentralized solutions can ensure 24/7 quality power for tens of millions of rural Indians. By joining forces, they can.