New Delhi: While the primary focus of rural electrification schemes in India has been on the extension of central grid infrastructure, popularity of distributed renewable energy (DRE) solutions such as mini-grids is rising. It is generally expected that mini-grids cannot sustain along with grid-based electricity. With the expansion of household electrification with schemes such as Saubhagya, the financial risk for mini-grids is likely to increase. However, recent research in rural Uttar Pradesh and Bihar suggests that despite the presence of central-grid infrastructure, users adopt mini-grid in regions that lack reliable power supply. But their use remains limited to meeting basic lighting and cooling loads in most cases, primarily due to affordability concerns.
Grid Vs Mini-Grid
Today, in India, mini-grids are being developed for not only electrifying remote villages, but also in grid-electrified villages in states with highly unreliable power supply such as Uttar Pradesh and Bihar. With the aim of mainstreaming renewable energy, Ministry of New and Renewable Energy (MNRE) released a draft national policy in 2016 to deploy 10,000 micro and mini-grids across India, and provide a framework for their operation alongside the central grid.
Grid-based electrification is highly subsidized in India – with smaller users, especially those in rural areas, being cross-subsidized by larger ones. These subsidized tariffs make grid-based electricity affordable, especially in rural India, but they also make it harder for mini-grids to compete with the price of grid-based electricity. That’s why the arrival of grid is considered one of the biggest threats to the operations of mini-grids.
Users adopt mini-grid for reliable power supply
To understand the operation of mini-grids in the presence of grid-based electricity, 2,648 households and 544 non-farm enterprises were interviewed from 54 villages in the states of Uttar Pradesh and Bihar where both central grid and solar mini-grid solutions were available. These interviews were conducted as part of a larger study aimed at understanding rural electricity demand and consumer behavior in India carried out by the by the Initiative on Sustainable Energy Policy (ISEP), in collaboration with Smart Power India (SPI) and funded by the Rockefeller Foundation, during the summer months of April-June in 2018.
We found that solar mini-grids can play an important role in providing last mile electricity access, in villages where grid-electricity is available but not reliable. In the surveyed villages, rural enterprises had adopted alternatives to grid-electricity at a higher rate than rural households. While more than 60% of the surveyed households reported grid-electricity as their primary source of electricity, only about 30% of the enterprises relied on grid-electricity as their primary source. The remaining relied on alternatives, particularly solar mini-grids, for power supply.
The average daily hours of power supply in the surveyed villages varied between 11-14 hours, with about 3 to 4 hours of power outages between 6PM and 12 AM on average. As this lack of reliability can negatively impact the productivity of enterprises, provision of reliable power supply when it was most required, i.e. during evening hours, is likely to have driven the adoption of mini-grids among enterprises.
But we also found that the use of mini-grids remained largely limited to basic lighting and cooling purposes only due to affordability challenges. Given the high cost of operation of mini-grids, scaling up their use to meet motive loads remained a challenge.
Need to link rural electrification with rural development plans
The findings highlight that customers adopt and use mini-grids even in grid-electrified villages owing to reliability concerns. In order to ensure that customers are able to access reliable power supply at affordable rates, rural energy planners need to pay more attention towards providing reliable grid-based electricity. Mini-grid based solutions can play a role in serving users, especially rural enterprises, in the short term.
However, another important finding of the study was that a significant share of rural enterprises in the surveyed villages were either un-electrified or had low demand for electricity, despite the availability of both grid and mini-grid solutions. While it is important to improve electricity access, extension of electricity services alone cannot steer growth and development of rural enterprises. It is important to link rural electrification programs with rural development plans. This will not only aid rural development but also increase electricity demand in Indian villages that, in turn, can improve the financial viability and thus quality of electricity services in rural areas.
This piece was authored by Anjali Sharma. She has a PhD in Public Policy from University of Maryland-College Park and will join as a Postdoctoral Fellow with the Energy, Resources and Environment (ERE) program at the Johns Hopkins School of Advanced International Studies (SAIS) in August 2020
[This article is published as part of a series titled Energizing Rural India under an editorial partnership between ETEnergyworld and Power for All]