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.

Cleantech Forum Delhi: Solve India’s problems, and you can solve the world’s

Cleantech Forum XXIV happened in Delhi last week. Nick Parker, in his opening remarks, said “Solve India’s problems, and you can solve problems for another 2 billion people of the world.” That to me signifies the economic promise that cleantech holds for India.

Below are key takeways I gleaned from the event’s keynote speeches, panel discussions, entrepreneurs’ pitches, and networking breaks. Time permitting I will post more detail later.

Cleantech investment in India will overwhelmingly focus on bringing existing technologies to the Indian markets. Innovations involved, if any, can be classified as technology modifications, aggregating multiple technologies or business model innovation. Fundamental technology innovation remains rare, even in large companies. Only one India-based company presenting at the event, Carbon Clean Solutions, was based on technology innovation.

Large scale power generation and industrial/commercial energy efficiency dominate. Many 10-50MW solar power plants are being funded, supported by central and state governments intent on building up solar demand in large chunks. The CDM mechanism has provided additional revenue streams for both renewable energy and energy efficiency projects.

Green buildings (and related technologies), rural/decentralized power, and waste-to-resources (including energy, water and valued materials) are gaining momentum. GreenSpaces, Rehact, Barefoot Power, Sustainable Energy Solutions Afghanistan and Genesyst Ecotechnologies that presented at the conference fall in these categories.

Water, though acknowledged as a huge challenge, remains a hard nut to crack, for entrepreneurs and investors. (If you know of a company making money doing rain-water harvesting, give me a shout!!) WaterHealth’s CEO was at the event, but no other sustained success story comes to my mind in terms of providing decentralized drinking water solutions to rural poor.

Agriculture, a leading consumer of energy and water, is a sector that needs innovation in many pre- and post-harvest areas. But small farm size and counter-productive (and politically untouchable) government incentives remain key impediments. Incidentally, an India company Jain Irrigation made the Global Cleantech 100 list chosen from 60,000 companies worldwide. Representing the company at the event was Dr. D. N. Kulkarni, president “Sustainable Agriculture for Small Holders.”

“Lot of ‘dry powder’ is looking for investment opportunities” said several investors representing VC/PE firms at the event. But don’t expect a flurry of deals. Patience and pragmatism were in no short supply among those I talked with, given that global markets are just emerging from a severe cash crunch.

Global entrepreneurs are beginning to look for capital and strategic partners in India. Six of the eleven companies that presented at the event were based outside of India. While the Cleantech Group should certainly take credit for bringing them to Delhi, I think it does show that entrepreneurs now see India’s value both as a market and source of capital. The ones I talked with understood the importance of local strategic partners and connections to succeed in India.

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.

Plastic Waste Explosion! – By The Numbers

Researching for an upcoming post on Landfill Gas to Energy opportunity in India, I came across some astounding numbers that make clear how our use of plastics and rubber has exploded over the last decade. Check it out in By The Numbers. Use of paper has increased significantly too, but it’s nowhere near as dramatic as plastics and rubber.

There used to be a time when most of us carried our own bags or baskets when we went shopping for vegetables or groceries. Take the poll below and let us know whether you still do.

Oil Below $60: Time to Wean India off Petroleum Subsidies

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As oil fell below $60/barrel last week from its peak of $145 in July 2008, Indian government has come under increasing political and public pressure to decrease fuel prices. So far Dr. Manmohan Singh has held firm citing the need for India’s oil companies to make up some of the massive losses they incurred over the past couple of years. After all, as oil climbed to record highs, Indian government increased prices just twice in two years.

The move is in line with what most economists argue vehemently: if consumers and industry are protected with artificially low prices when oil prices in free markets soar, they should also be prepared to pay higher than free market prices when prices fall. Sure this is simple economic sustainability, but only in a rather narrow sense. In my mind, all this talk about what the price of petrol or kerosene should be misses a bigger and more opportune question to consider: Shouldn’t the government stop meddling in fuel prices?

Not exactly a new idea, I admit, but in the Indian context it would be radical. Not the least because it would take a significant shift in energy policy, and that too at a politically inconvenient time not far from general elections. Despite the seemingly insurmountable odds of getting this done, I strongly feel it’s an idea whose time has come.

For decades the Indian government has indulged in bizarre practices of price-setting and cross-subsidization of petroleum commodities in the name of protecting the poor. These tactics have proved downright counter productive. For example, the artificially low price of diesel have inflated demand so much that losses from diesel account for 50% of all petroleum losses. Why? Turns out the government has inadvertently made diesel cheaper than fuel oil, a commodity used in industrial power generation. This growth in demand, now at 18-20% per year, will force India’s public sector oil companies to import diesel as they are prepared to meet only 12-15% growth with domestic refining. This in turn will magnify the losses incurred.

Kerosene subsidies are another case in the point. Cheap kerosene is used to adulterate as much as 40% of petroleum products sold nationwide according to a study by CONCERT (Centre for Consumer Education, Research, Teaching, Training and Testing).

Add current energy price volatility to government’s inability to effectively limit subsidies only to those who truly need them, the result is that even the most well-intentioned price intervention is bound to result in perverse negative consequences that will hurt us for decades to come. Energy efficiency improvements and renewable energy resources, both critical for future economic and social health, are victims of petroleum subsidies.

If there ever was an opportune time to say goodbye to petroleum subsidies, it is NOW. Why? Because low oil prices allow such a move while inflicting least short-term pain on Indian consumers and industry. Global energy demand is expected to stay low over the next year, but as the economy recovers, so will oil prices as IEA predicted in its latest World Energy Outlook. So instead of incurring record petroleum losses (Rs. 1,30,000 Crores in this fiscal year), we would be much better served to find ways to divert that money to energy efficiency efforts, hybrid or electric vehicles, smarter electricity grid and local renewable energy resources instead.

Author and Copyright:  Raghu Dharmaraju

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: Indians Without Grid Electricity

See how World Bank and Indian Government estimates of number of Indians without access to grid electricity compare in our new page: BY THE NUMBERS. You will be surprised.