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India: Renewable Energy and the Minigrid, The Indian Experience

Session 3: Energy Services: Rural Electricity – Barriers to and Incentives for Promoting Renewables

Sunil Dhingra, Senior Fellow, TERI, New Delhi


In this Presentation
1. Why Rural Electrification through Renewable Sources 2. Rural Electricity Access 3. Rural Electrification initiatives of GoI 4. Provisions under different schemes 5. Main Barriers 6. Key Learning 7. Few Projects Highlights/Glimpses 8. TERI’s initiatives to improve Rural Electricity Access 9. In sum


Why Rural Electrification based Renewable Energy
 Renewable Energy System (typically a few kWs to a few hundred kWs capacity) in developing countries have the potential to extend access to affordable, reliable and clean energy to the 1.5 billion people in rural areas who do not have grid access  Enabling energy independence and security  Enhance economic and social development  Reducing specific CO2 emissions and the effects of climate change  “RES are today cost‐competitive for off‐ and mini‐grid applications, they offer an enormous potential for reducing poverty by providing remote areas with clean energy access and, concurrently, reducing carbon emissions with relatively low additional or even negative costs”(IEA, 2011)

Rural Electricity Access
 About 42,000 villages (7%) in the country still remain un‐electrified.  Nearly 33% of rural households mainly in rural India are without electricity access (Census 2011)  Rural areas face major challenges of low per capita consumption and inadequate power supply  In the last decade, electricity generation increased by 60%

 But increase in access to households increased by only 23%
 Average annual per capita consumption of electricity is 632 kWh
… compared to China (900 kWh), Thailand (1,500 kWh) and Malaysia (2500 KWh)

Rural Electrification Initiatives of GoI
The Rajiv Gandhi Grameen Vidyutikaran Yojana (RGGVY), launched in April 2005 aims at: Grid Extension(2005)

• •

Electrifying all villages and habitations Providing access to electricity to all rural households Providing free-of-charge connections to Below Poverty Line (BPL) families

Off-grid through renewable sources in rural areas
• Decentralized Distributed Generation (DDG) Program under RGGVY MoP: Capital & operating incentives to off-grid distribution generation projects in villages without grid connections • Remote Village Electrification Programme by implementing renewable energy projects in off‐grid decentralized mode at the locations where extending grid electricity have been deemed unsuitable (economically or technically). • Village Energy Security Programme through biomass based system • State specific DRE initiatives (Chhattisgarh, WB, Orissa) To cover remote villages • Other initiatives (TERI, SELCO, DESI Power, Husk Power etc..)

Provisions under different Programs
Components Eligibility condition Physical target/Launch Year Achievement RVEP Village population <= 100 10,000 remote villages (2002-03) VESP 25 – 200 households 200 remote and inaccessible villages (2005) 700 kW capacity, 79 projects sanctioned DDG > 100 households No clear target (2009)

9,009 remote villages

283 projects sanctioned

Technology preference

95 % projects SPV

Biomass and bioenergy

No preference

Energy applications


Cooking, lighting & motive power

Lighting and productive use

Contd…. Provisions under different Programs
Components Implementing agency Financial arrangement RVEP SNA Min(90 % of capital cost, benchmark cost) and balance by State Govt Community VESP Govt. dept., NGOs Grant up to 90 % of the project cost And balance by State Govt Community/NGOs DDG SNA, identified CPSUs, SEBs 90 % of the project cost as subsidy and balance 10% as loan or Grant from State Govt Private developers/Community



5 year grant for annual maintenance contract with supplier

Min(2 years O&M, 10 % of project cost)

Viability gap between O&M and revenue generated funded for 5 years (upto 8% project costs)

Glimpses of off-grid Rural Electrification projects in India

Main Barriers
Policy and Regulatory
•Competition from conventional grid •Tariff Subsidy under Grid Extension Program • Higher tariff charged to off grid users compared to grid electricity tariff •No clarity on status of stand alone plants on eventual arrival of grid •Inadequate support under viability gap funding mechanism • Poor response from states and project developers.

Technology and Financial
•High cost of generation due to load factor issues (low PLF) •More finance, from many sources and in many forms needed: with solutions matched to particular challenges, risks and returns •In general, off-grid connections less attractive to the private sector as low financial returns •Grid integration constraints •Lack of technological expertise at local level

•Weakest link in many of projects with less uptime due to absence of project ownership •Poor Maintenance and servicing of equipment •Long term fuel supply arrangements in case of biomass •Monthly tariff realization challenge on continuous basis •Absence of role clarity between different stakeholders

Capacity and Skill
•Lack of capacity, training, technical assistance, and capacity building framework •Inadequate capacity building of local operators •Enabling infrastructure weak in the state

•Lack of programs to improve economic benefits and productivity from modern energy access


Key Learning in providing access to off-grid areas:
Institutional Model •Community owned and managed to Entrepreneur/Franchisee based model •Incubate enterprise models through the application of sound technological, environmental and market practices Financing • Move from Upfront capital grant based to Performance linked •Innovate business solutions that can create livelihoods, meet basic needs and realize environmental benefits on a large scale Technology and Service • Need to improve the technology standard both energy and environmental performance of existing technologies • Institute support service mechanisms to ensure viability and longterm sustainability

TERI Initiatives Rural Electricity Access

Technology Development

Rural energy transitions


Two stage biomas gasifier for electricity generation

Study the energy poverty, inequality across income class groups and between regions

LABL, biomass based electricity systems

Biomass and Solar based poly generation system (electricity + cooling)

Setting up Solar charging stations, entrepreneur based business model, total 800 kW biomass gasifiers system

Knowledge exchange, technology transfer and market development

Innovations in LaBL Innovating at LaBL
 Continuous improvements in solar lantern designs with reputed technology partners, driving down cost, improving efficiency & quality

 Charging stations expandable to solar energy hubs, providing services like water purification, mobile & battery charging
 Technical Resource Centres, an after-sales service network for responsive repair services through local community representatives

Journey so far…. Journey so far…………
370 000 lives impacted

75 000 solar lanterns

1486 villages covered

21 States

5 countries

> 1500
green jobs created

> 60
NGOs involved

In Sum:
 Energization based on renewable sources of remote areas is not an easy process: it requires sophisticated approaches and long-term planning  Projects must adapt to local conditions; across different income groups in different regions, the mobilization of local communities is essential.  Promotional aspects of Renewable Energy based Rural Electrification policies  Need for additional policy and regulatory mechanisms to de‐link the project financial viability from the high consumer tariffs being levied on the off‐grid consumers.  Compliance related aspects of Rural Electrification projects so that a greater diversity of models, many of which have been demonstrated by different agencies are able to find space, benefit from and influence policy through good practices.  To address specific Stress Points in policy, such as: ◦ Problems faced by project developers amongst which, for example, dialogue between DRES plant owners and state DISCOMS is an urgent need ◦ DRES grid interconnection to the local LT Network ◦ innovative business models that could be supported under a more conducive policy environment

Thanks for your kind attention