Solar PV based mini-grid: admirable rural pilot, but tough to replicate

While attending a solar industry conference about a month ago, Ravi Khanna, CEO of Scatec Solar, talked about a successful rural electrification demo project: a 8.7 kWp photovoltaic power plant, and a “mini-grid” connecting it to all 70 households in Rampura, a village near Jhansi in the Bundelkhand region.

Now this is unique, I thought, but I wondered if this was really a sustainable and replicable model. If it did work, what pre-existing conditions and post-execution mechanisms contributed? I wanted to see it for myself, so last week I visited Rampura. Development Alternatives (DA), the NGO that helped identify the village and execute the project, played host for the day sharing great insight into how the project came to be.

Sponsored by Scatec Solar, and executed by Bergen and Solar 23, the solar PV and mini-grid installation took under a month. But DA was laying the ground work for about 6 months prior to that. It helped identify the village and built support in community and local government. DA also helped pull a 13 member governing committee made up of villagers. The committee operates the installation with technical help from Bergen and collects monthly bills based on usage.

According to DA folks on the ground, one reason Rampura project works is because the village has no access whatsoever to another power source, grid or otherwise. Often, villagers get used to “free” (albeit irregular and undependable) power from electric grid using metal hooks to tap into uninsulated power lines. That could become a siginficant hurdle to accepting a mechanism that requires to them pay as per usage.

Also, Rampura is a small close-knit community, with strong family and social support structure. This meant, they easily came together seeing an opportunity to improve their collective standard of living. This cohesiveness is more difficult to achieve in villages closer to urban centers, where significant number of villagers migrate to cities.

Household and population density matters too. Mini-grid costs and inefficiencies go up with goegraphic spread. I don’t have information on financial aspects yet, but was told informally that it cost about Rs.13-14 lakhs. That’s about Rs.150-160 per Wp. To me that seems low.

Even if we ignore the financials, it is obvious that the “Solar PV + Mini-Grid” approach is not for all villages. It is not a model that lends itself to fast replication easily, even with support from local NGOs like DA. Remember it took DA almost six months to identify the village and prepare for execution. A for-profit entity will need to build this function (alone or collaborate) at a large scale to have enough projects in the pipeline.

India’s solar industry eyes huge rural opportunity

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I was at ICORE 2009, a renewable energy conference organized by Solar Energy Society of India (SESI). This year’s focus: Renewable Energy for Rural Development.  

I heard industry leaders talk passionately about potential for solar to truly bring electricity to rural communities and catalyze grassroots social and economic development. Plenty of discussion circled around industry’s demand for adequate support, recognition of its potential, “leveling the playing field”  and inclusion on policy discussions. Overall, the energetic conversaion between industry and government reps was indicative of an evolving sector keen not to miss growth opportunities during a time that many see as the inflection point.

The following observations are not new, but are notable because they were made by industry representatives and collectively signal that India’s solar players “get it.”

1. There are more villages and rural population without electricity or access to quality electricity than government statistics let on. The need is such that the entire “20 GW by 2020″ goal could be met by rural systems and hardly make a dent in demand. We need more aggressive goals.

2. Decentralized solar can more cost effectively make a difference than centralized multi-MW solar power plants because of the grid’s poor quality. Transmission losses are as high as 50-60% in some states where the need for rural power is greatest.

3. Government’s policy framework should recognize the above facts and incentivise rural electrification via decentralized solar deployment accordingly. Today it does not.

The hot button issue of the event clearly was about how central government should support both manufacturing and usage (including rural) of PV and solar thermal. The lively conversation between MNRE (Ministry of New and Renewable Energy) representatives and industry leaders bordered on an open negotiation.

The following were the broad themes in this regard.

1. Comparison with conventional energy sources, especially coal: It is wrong to compare solar with coal simply on upfront costs alone. Costs associated with fuel (coal), operation & maintenance, grid losses and cost of grid need to be accounted for. MNRE’s response was mixed. While acknowledging the need to devise “apples to apples” comparison, they maintained solar is costly and that their goal is to reduce costs for the consumer.

2. Consistent support for on-grid & off-grid solar power generation: Given the poor quality of the grid and significant hours in a day when the grid is “down,” government should provide consistent tarriff for solar energy produced & used irrespective of grid connection. MNRE’s reps were amenable to the idea and said this may require a certification mechanism via independent 3rd party entities that are able to verify useful electricity produced from distributed power generation.

3. Support for Indian manufacturers to compete, especially with Chinese manufacturers: Industry reps feel Indian goverment needs to do more to “level the playing field” for them to compete with Chinese companies, which apparently receive free land and very cheap capital from China’s government. MNRE reps gave a sneak peek into November announcements stating that “generous” support is on its way.

4. Anti-dumping / quality laws: As PV prices tumble, manufacturers are feeling the pinch. Some industry reps clearly were enraged by what they called “low quality, low cost” products entering India. MNRE indicated new quality certification programs will help here, but ultimately consumer should remain the decision maker.

Both MNRE directors and SESI officers repeatedly referred to an upcoming MNRE policy/tarrif announcement expected around November 15, 2009.  I can’t wait to see its details!

In the next couple of posts, I will focus on the most interesting speakers/conversations of the event from my perspective.

Can the Poor Afford Cleantech?

That’s a question I get often from friends and family in India and the US. “We need to feed our masses and eradicate poverty before we can worry about the environment,” the logic goes. That there must be a trade-off between the economy and the environment is the entrenched public and political opinion in India.

On the surface, there appears to be plenty of evidence to support this view: Solar costs aren’t at grid parity yet. LED and fluorescent lamps cost way more than incandescent bulbs. The poor will never pay for water, leave alone the latest purification technologies. And the fact that electricity and water are both government-controlled utilities makes matters worse with red tape and inefficiency.

My response to this usually involves two examples: SELCO India and WaterHealth International. SELCO has been bringing photovoltaics to the poorest customers for more than 10 years now, while thousands of villagers are paying for water purified by WaterHealth’s technology.

How? Well, the secret sauce in their success, other than of course the extraordinary commitment of their leadership, is what Stu Hart terms “radical transactiveness.” To put simply, radical transactiveness is to dive deep into your customers’ experience, often with stakeholders other than just the company, to co-create/evolve a business model that works for the customers at the “base of the economic pyramid”(aka BOP).

SELCO recognized that its customers had no access to grid and were instead heavily reliant on kerosene! He recognized that with the appropriate microfinancing mechanism, daily payments toward a solar home system cost his customers less than what they shelled out for kerosene. The improved quality of light and air also enabled additional income generation and healthcare cost avoidance. (Click here for an awesome first hand account of how SELCO works by Raj Melville)

“Grid parity” simply does not matter to the approximately 100,000 villages of India that aren’t yet connected to the grid! Even in urban India, the cost of backup power generation from diesel or petrol must be accounted for to draw a fair comparison in many cases. (See article regarding India’s dependence on liquid fossil fuels for backup power generation.)

WaterHealth did not create a home purification system for the poor. Instead they discovered by engaging local communities and NGOs, that even the poorest were willing to “pay per use” via a community-level water purification system. The source of water itself does not change from before the project.

At 1 Rupee for 15 litres, 60% to 80% of total village population uses WaterHealth’s facilities. Turns out the poor will indeed pay for basic necessities such as clean water. Villagers reported improved health and ability to work for a living.

Any venture capitalist or entrepreneur will tell you that a superior technology does not ensure market success. That’s true for cleantech as well. I am not down playing the difficulty of introducing new technologies in the BOP market. But it’s not the technology’s fault if the business model imposed is inappropriate.

The poor certainly can afford cleantech. And as the examples above prove, often they stand to benefit the most from clean technologies.

Suzlon has aggressive plans for China

Suzlon, the Indian wind energy giant, had announced back in April that it secured 200 MW worth orders in China. But apparently that was just the beginning.

Just as China is seeking to tap into its wind energy potential, Suzlon has teamed up with the Bahranian bank Arcapita to form a JV to acquire London-based Honiton Energy Holdings. Honiton, it turns out, holds rights to develop major wind farms in five provinces including the wind-rich Inner Mongolia region. Currently, it intends to develop 1,650 MW wind farm capacity.

NDRC (National Development and Reform Commission), China’s economic planning agency, set a target of 10GW of installed wind power capacity by 2010. China had 5.9 GW at the end of 2007 according to GWEC’s 2007 report. Accounting for the 1,650MW that Honiton plans for 2010, that only leaves about 2.4 GW capacity yet to be spoken for.

I find that rather underwhelming because in 2007 alone China added 3.3 GW of new wind power capacity. GWEC predicts instead that China will have 50 GW of wind energy capacity by 2015, which is more in line with expectations that China will be the largest contributor to growth in wind power industry over next few years.

Expect to see more announcements of deals similar to Suzlon’s by other wind energy giants to enter the Chinese market. This is just the beginning. Indeed.

BBC Takes a Critical Look at Carbon Trading

With the backdrop of G8 + Developing Nations negotiations regarding green house gas emissions, the BBC and PRI put out two awesome episodes of the popular Changing World podcast.

Check them out!

Both focus on whether the UN’s Clean Development Mechanism aka CDM (born out of Kyoto Protocol) is achieving what it’s meant to do. For anyone interested in India, the first episode is a “must listen.” It’s especially relevant given the increased interest in CDM-related activity in India (see earlier post here).

I think the program is an excellent piece of journalism, that explains how CDM works and also gives equal airtime to supporters, critics, administrators and beneficiaries of the program. Just shows why carbon trading continues to generate interesting discussion. Enjoy!