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Policy and Regulatory Interventions to Support Community Level Off Grid Projects

Balawant Joshi Director, ABPS Infrastructure Advisory Pvt. Ltd. June 04, 2012

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Rural Electrification Scenario in India
 Mission to bring electricity services to ALL by 2012 is on  Out of 6 lakh census villages, only 14,000 are remaining  However, 32.7% households are yet to be electrified  Several of these households are in un electrified villages, padas, bastis.  Typically these habitations have less than 100 households  Even electrified villages are witnessing shortages in supply  At the same time, local renewable resources are not being tapped  Costs of renewable technologies is reducing with time  It has become imperative to develop decentralized RE generation options

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Typical Off-grid village profile
 Remote unapproachable locations
 >10km distance from block quarters  >5km distance from 11kVgrid  Much higher in tribal central & western region

 Inaccessible by pakka road – No year round connectivity

 Being a agriculture based country,
 Rural population depends on agriculture for livelihood  Absence of commercial activity  Majority population comprises of household self farming  Mainly single rain fed crop & some case gypsy zoom cultivation  Others – workers (under various rural development schemes)

 Low income levels – low cash liquidity
 >40% BPL population  Approx monthly per capita income ~Rs 300 or USD 6

 Low literacy rate (~40% overall) – lack of skilled manpower
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Load Pattern, Energy use & Willingness to Pay
Domestic Village Demand: 500-3750 kWh Commercial Village Demand: 30 – 1500 kWh
Possible load mix: Initially around 70-80% domestic. Commercial fraction increases slowly with time & development of income generation activities

Present Energy Use Pattern
Lighting:  Kerosene is used by Domestic consumers.
 3 – 9 lit/month (@avg price Rs 9/lit)

Willingness to Pay
Lighting:  Equivalent to monthly Kerosene cost (30-120 Rs/month)  Varies with region/area (higher with higher monetary income)  Higher in some areas who are already using DG set electricity for light  Rs 10-15 per kWh (equivalent to DG price)

 Commercial consumers use DG sets.
 Diesel costs Rs. 45/ litre

Costs incurred by currently un-electrified households is far more than costs incurred by electrified

consumers in DISCOM area;
Per kWh tariffs paid by consumers of off-grid scheme are far higher than that of DISCOM

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Key Challenges in Rural Electrification
 Reliance on large share of subsidy  Technology specific schemes  Where grid has reached, supply is severely constrained  Relies heavily on NGO, PRI, SNAs for implementation  Limited, if any, role of private sector  Lack of clarity on issues related to supply and collection of charges

 National level schemes could not account for local resource issues
 Large scale deployment & optimization of subsidy were not objectives  Consequences of grid expansion are not considered  Existing policies/programmes are inadequate for large scale deployment
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Issues with Legal and Policy Framework
 The Electricity Act 2003 has Several provisions for promotion Rural Electrification  Attempt to promote every possible model  No structure to implement “license exempt” framework  Franchisee framework has emerged over time  Sometimes, different ministries pursuing different approaches  As a result, weak or no implementation framework prescribed  Consequently, very little private sector participation.

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Characteristics of PRI
 Business model proposed in PRI must work in off-grid & grid connected set up  Consumer should not pay more than
 Electricity tariff in adjoining areas (not more than DISCOM tariff)  Existing expenditure on lighting load

 Compliant with EA 2003, existing policies  Create structure for flow of subsidy  As far as possible, internalization of costs of Rural Electrification  Should make use of existing institutional structure  Avoid conflict between programmes of two ministries  Should promote private sector involvement
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Off-Grid Distributed Generation Based Distribution Franchisee
O D G B D F
Government

Subsidy, if required

DISCOM

FIT (Cash Flow) Consumer tariff

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PPA and FA DPR Financial Closure Project Commissioning

Project Developer

Tariff (Cash Flow) Flow of Electricity

Consumer

Consumer

Consumer

Consumer
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Institutional & Contractual Structure
O D G B D F

GoI
CFA Model Franchisee (optional) Scheme

FOR
Model Regulations for Off-Grid Supply

CEA
Model grid connected guidelines

State Govt

SERC
Regulations for Off-Grid Supply FIT Order

Notification of rural area
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RLB
Confirm unelectrified status of village / hamlet Consent Franchisee Agreement

DISCOM
PPA

ODGBDF

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Advantages of the Proposed Model
O D G B D F

    

Maximum certainty of revenue to the developer Proper integration of off-grid projects with grid as and when is feasible Would enable large scale deployment of off-grid projects Internalisation of costs of rural electrification DISCOM can meet meet twin objective of electrification and RPO

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Possible to customise model according to local requirements
Optimum utilisation of the government subsidy, if offered


 

FIT guidelines at national level would bring in uniformity.
Distribution franchisee framework under RGGVY could be adopted Model could be used for off-grid as well as on-grid supply augmentation
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Email: contact@abpsinfra.com

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