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.

Selling Solar in India

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Selling Solar is the title of a new book by Damian Miller, an entrepreneur who built successful businesses selling solar energy systems to consumers in developing nations like India and Sri Lanka.

Coincidentally,  Selling Solar was also the title of a pioneering report published fifteen years ago by the Rockefeller Brothers Fund. It explored how projects such as those of then newly formed SELF (Solar Electric Light Fund) in India and Sri Lanka could be scaled up dramatically to provide widespread affordable power in developing nations. In fifteen pages, it highlighted the need for innovative and accessible financing mechanisms.

SELF was founded by Neville Williams, who co-founded SELCO-India with Harish Hande around 1994. Today SELCO is widely feted and Harish has won numerous accolades over the years and finally entered the mainstream media’s consciousness this year when Financial Times recognized him with the Arcelor Mittal “Boldness in Business” award this year.

It wasn’t easy for Harish. Especially during the initial years when he needed to find organizations willing to partner in enabling a business model based on innovative financing and linkages. Even recent years have been challenging. They were the same years photovoltaic manufacturers industry as a whole enjoyed a resurgence. I talked with Harish in early 2006 as part of a study for the BoP Lab when I was at Cornell’s Johnson School. He lamented how European subsidies pushed photovoltaic prices beyond the reach of people who really needed it and were using the technology well before . Ironic, I thought. He also expressed frustration at how many bilateral and multilateral organizations that try to help don’t understand how important the financial innovation and linkages are.

But three years hence, things are looking up. For his customers, that is. With the fall of photovoltaic prices and recognition of the vast rural and sub-urban markets under-served by grid power, there is a huge interest from entrepreneurs and investors in “distributed power generation.” Solar technologies are at the center.

In his book, Selling Solar, Damian Miller uses diffusion theory to explain the spread of solar in developing world, and credits entrepreneurs like Harish Hande for driving technology innovation and policy along with market penetration. His company Orb Energy, backed by London based Zouk Ventures, entered India in 2006 and has field offices in Andhra Pradesh, Karnataka, Kerala and Maharshtra.

Venture backed activity has definitely picked up. Venture East funded Hyderabad Intelizon founded by Kushant Uppal an entrepreneur from Silicon Valley. Meanwhile, Idealab - the California company credited with pioneering the incubator model – is backing Ahmedabad based Distribute World Power.  So SELCO, operating in Karnataka and Gujarat, has competition now!! SELCO itself has gotten an infusion of new capital from Good Energies and Lemelson Foundation, both non-Indian entities.

Finally the floodgates seem to have opened.  Are we at the tipping point? I think so.

How many years before every child in every village and slum has a bright light to study by without breathing in noxious kerosene fumes? Hopefully, that day will be here soon with many more entrepreneurs and companies selling solar.

Let there be light!

Solar photovoltaic prices set to tumble – By The Numbers

Solar industry experts have been predicting that solar grade polysilicon supply will catch up with demand in 2009. Check out the latest forecast regarding this in By The Numbers.

Finally, smaller retail players in emerging markets like India, at least those who are able to find funding, can make a push to expand and reach new customers. For the past few years demand from developed markets like Germany and high silicon prices together had pushed module prices beyond the reach of most customers in markets like India. Despite the tough economic outlook, this will surely begin to change that.

Clinton Foundation plans 5 GW solar park in India

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The Clinton Foundation is working with the government of the state of Gujarat to develop an “Integrated Solar City.” Estimated to cost $4.75 billion (Rs. 20,000 crore), the “city” will manufacture solar power components in addition to generating power according to Business Standard. No details yet on whether “components” include photovoltaic cells or modules, nor is it clear which photovoltaic technologies will be used for power generation.

The foundation has already been talking with the state governments of Andhra Pradesh and Rajasthan to identify sites for clean power generation projects. In Anantapur district of Andhra Pradesh, it is considering a combined solar and wind project. In Jaisalmer district of Rajasthan, a solar plant is being considered.

With a reported sum of $12 billion set aside for clean power initiatives and backing of numerous corporations including GE and Microsoft, the Clinton Foundation seems set to heat up the large scale solar plants arena. Though a part of me couldn’t be happier about all this activity around large scale solar projects, another part of me has serious reservations. More on that in the next post.

Will Jatropha Impact Food Prices?

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It wasn’t long ago that corn ethanol seemed like a win-win idea from all angles. In the US, farmers, environmentalists and politicians of all stripes piled on. A few did acknowledge that Brazilian sugarcane was a better idea, and even fewer did point out the risk to food prices, but overall their voices and better sense were drowned by a wave of euphoria around corn ethanol.

Energy prices, of course, are the main cause behind increase in food prices, but not many dispute the fact that corn ethanol had a role too. In hindsight, that relationship is not hard to grasp: when demand for corn surged, the price did too without a similar spike in supply. It’s economics 101 – basic supply and demand.

Now, consider another plant that’s being widely touted as the ideal source of biofuels – jatropha. Jatropha is not a food crop,and it can be grown in barren and waste land with relatively little water. What’s not to like, huh?

Well, let’s apply some basic economics principles to this situation. Whenever the market price for a certain product increases, there will be more willing suppliers of that product. And that will be true for jatropha seeds too.

Large areas of the country have increasingly experienced drought conditions. Maharashtra, Andhra Pradesh, Madhya Pradesh and Karnataka have seen thousands of farmer suicides in recent years because of crop failures due to drought. It is not far fetched to think some of these farmers might find it easier to grow jatropha than, say, rice.

Leveling rice and wheat yields per hectare is a worrying sign in itself. If fuel crops like jatropha intrude into this traditional crop land, the price pressures on food grain will be compounded.

As the euphoria around jatropha grows, it will pay to remember the harsh lessons learnt from the corn ethanol experience. India has more than enough waste and barren land suitable for jatropha – 63.85 million hectares – to make a significant dent in the nation’s energy needs even with low biodiesel yields (say 650 litres/hectare as opposed to published highs of 1800 or 2200 litres/hectare).

If jatropha is allowed to take over too much food grain land, however, the only way to compensate for that with very little fertile land left to cultivate, will be with efficiency increases in food crops. And that’s something the country has failed to achieve in the last few years.

By the Numbers: Jatropha

Just want to draw your attention to the new page on this blog “BY THE NUMBERS” (see title bar) I come across a lot of statistics/numbers related to cleantech while researching for my blogs. Instead of losing them, I thought it isn’t a bad idea to park them on separate page.

The first set of numbers compares Jatropha oil yield per hectare to other crops. Check it out.

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.

What’s Liquid Fuel got to do with Grid Power?

In an earlier blog I posed a provocative question of whether cleantech would solve India’s convoluted foreign policy situation. Why not spend the billions of dollars on incentives for renewables and energy efficiency, I asked, instead of pursuing a fossil fuels pipeline plan from Iran which seems far from materializing anyway? I threw in US Nuclear deal and China trade relations (China competing for same pipelines via Pak) for some dramatic effect. I admit, the whole idea of cleantech being a panacea for India’s foreign relations web, was far-fetched and meant to be provocative.

Interestingly, I got a very good comment from a reader saying solving electric grid power problems is disjointed from the liquid fuel crisis. I disagree. Here’s why…

The reader’s observation holds true in most developed nations, and definitely so in the US, where liquid fuels are predominantly used for transportation, and almost none for grid (or equivalent captive) power generation. However, in countries like India, there is a significant linkage between liquid fuel (petrol/gasoline, diesel, kerosene) usage and the electric grid. Anyone who has lived in any part of India will know that most businesses in India have a backup power generator – usually either petrol/gasoline or diesel. Over the last decade these liquid fuel gensets have penetrated the residential market – apartment complexes, residential developments, and even individual upper middle class houses.

But the question of course is whether this linkage between liquid fuel and grid power is really significant enough to move the needle in the equation? After a little digging, I found some numbers. According to a recent Business Standard article, captive (non-grid) power generation in India amounts to 25,000 MW. That’s 17% of India’s entire power generation capacity. The article goes on to say the majority of that is diesel power. Even if that means only 50% of captive power generation is from diesel, that’s still a big link between liquid fuel and grid power. And this linkage only grows stronger as the diesel genset demand is growing 20-25% anually.

So in conclusion, I believe it’s a fair argument to say that cleantech efforts either to decrease power demand via energy efficiency solutions, or boost alternative sources of power (central or distributed genration), would both have the effect of decreasing liquid fossil fuel demand.

Punjab to Invest 51 bn Rupees (US$1.2 bn) in Renewable Energy by 2012

Punjab Energy Development Agency (PEDA) has recently announced it plans to invest 51 billion rupees in renewable energy by 2012. PEDA has set a goal to generate from renewable sources 10% of total energy generated in the state by then.

(For readers unfamiliar with India’s geography, Punjab is a state in north India bordering Pakistan. Economically, it’s one of the most advanced states in India with thriving agriculture and industry.)

This announcement has followed several aggressive moves by Punjab in recent months. Among them were 21 MOU’s for 250MW of “Mini” hydro-power projects (most recently with TOSS Hydro for a 20MW project).

PEDA has already invited proposals for 100MW of grid-connected solar power, and has chosen Moser Baer, PQES Inc, India Bulls Electricity and Azure Power for project(s) making up 17MW of that with a 30 year PPA. According to Bikram Singh Majithia, Punjab’s Minister for Science, Technology and Information, the agency will soon seek proposals for large-scale solar thermal plants.

In case you were wondering, Punjab’s definitely pursuing biomass too as part of its ambitious goals. And it’s no surprise for a state at the forefront of India’s agriculture sector. Agreements are already in place for 338MW of biomass power projects according to New Energy Finance. EnviTech (a German contractor) has a 30MW piece of that pie with GE supplying its Jenbacher biogas engines for the project. It’s not clear if the 147MW projects granted to Mumbai based Green Planet Energy Pvt Ltd are included in that 338MW.

No – PEDA has not left out wind energy either. In December last year (2007) it signed a MoU with Suzlon for 100MW of wind energy projects in the state.

So all these solar, biomass, wind and hydro projects added up to approximately 780 MW to 930 MW (based on whether some of these agreements are couched within other announcements or not). Based on Punjab’s announced goals of 1500MW from “non-conventional” energy, there are 700-600MW projects either yet to be granted, or I haven’t done my homework. Either way, Punjab is clearly setting a great example for other states in India to follow. Punjab’s neighboring states – Haryana and Rajasthan – have been just as aggressive. Stay tuned for more on them in upcoming posts.