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The Mini Grid’s Place in Rural Electrification

A recent article on Sun-Connect, “Solar power push lights up options for India’s rural women” conveyed powerful anecdotal evidence of the value of mini grids in rural electrification (note: in this article, we use the Government of India’s definition of a “mini grid” – a discrete localized grid with a generation capacity of at least 10kw and less than 100kw). The story of Akansha Singh is inspiring and is convincing that mini grids have the potential to impact lives.

However, the article is misleading, and a few points should be corrected, in particular:

  1. The ability to reach the last mile communities in rural India
  2. Actual cost to customer

 

The first is the most important. The article implies mini grids can help fill in rural India’s electrification gaps by reaching last mile communities. But this is incorrect. Smart Power India (SPI), which finances OMC and other mini grid operators, released a report “Expanding Opportunities for Renewable Energy-Based Mini-Grids in Rural India” in which it determined mini grids are only viable in villages and towns with more than one thousand households. In its “About Smart Power India” publication, SPI points out that 99.5% of such villages are already electrified. The mini grids SPI supports, therefore, reach communities which are already grid connected, not last-mile communities.

However, there are many unelectrified communities in India too small to meet a mini grid’s minimum customer base requirement. Most unelectrified, last-mile communities in India are hamlets, of which there are over 1 million in India and 160,000 in the state of Uttar Pradesh alone. To better visualize the size and remoteness of these communities, click on the below image to access a zoomable map on Google Maps.

 

A purple pin in the center marks the site of an SPI-supported mini grid. The circles represent off-grid panchayats (villages or clusters of hamlets) within 15 kilometers of the town, color coded by distance. Zooming in, you can see what these off-grid communities look like – most of them are smaller than 100 households, never mind 1,000 households. Within 15 kilometers, there are no clear off-grid community large enough to support a mini grid. However, there are approximately 100 off-grid panchayats which contain more than 500 off-grid hamlets and thousands of off-grid households within 15 kilometers. These are the last mile communities and they, by SPI’s own findings, cannot be served by mini grids.

According to the Rockefeller Foundation website, “Smart Power For Rural Development is a $75 million initiative launched by The Rockefeller Foundation in 2015 to address the ‘last-mile’ energy gap”. However, over time SPI found that the mini grid approach could not reach the last-mile hamlets, the communities that remain off-grid today. SPI opted to change its mission, and in 2017, in its “About Smart Power India” publication, SPI offers a new vision:

“To spur economic development in villages
through access to reliable 
electricity provided
by renewable energy mini-grids”

References to electrifying last-mile communities has been removed from the SPI mission statement, though the Rockefeller Foundation still maintains this language on their website. SPI now aims to provide more dependable power to electrified communities. This is a logical response and consistent with the evidence they have uncovered in the past few years: mini grids cannot provide power to unelectrified last-mile hamlets but can provide electricity to larger grid-connected villages and towns which do not receive dependable power 24 hours a day.

This is not a knock on mini grids. It should be noted that significant social value has been measured by building mini grids in already electrified communities which justifies mini grid replication in other towns and large villages across North India. However, readers should simply understand that mini grids cannot penetrate deep into rural India.

Cost to customer is also important. “Solar power push lights up options for India’s rural women” states that grid electricity is more expensive than mini grid power. However, in rural areas of Uttar Pradesh, a flat tariff of Rs. 180 per month is applied to rural households and micro enterprises which is lower than the cost of power from mini grids. The Rs. 1,000 mentioned in the article is the connection fee a local household would pay for grid power, not the monthly fee. In a recent Hystra report, the cost of power from mini grids was compared to power from the national grid and found to be more expensive.

Date Source: “Reaching Scale in Access to Energy”, Hystra, 2017
Figures are in USD per year.

 

But comparing cost to customer is not fair. The national grid is heavily subsidized and mini grids at best receive debt below commercial terms from SPI. Inevitably the cost to customer will be more expensive from mini grids than the national grid. This would be expected to change if the same subsidies to the national grid were applied to mini grids, as the above graph shows that mini grid prices are below the unsubsidized cost of grid power; but realistically public subsidies are likely far down the road as the longevity of a mini grid’s lifespan and relevance have yet to be proven. The premium pricing of power from mini grids is nothing to be ashamed of, but again those interested in the sector should be aware.

Mini grids play an important role in providing dependable power to grid connected communities with intermittent and undependable grid power. Communities, families, and students all benefit without question. There is no need to overstate the role of mini grids, claiming they can provide power cheaper than the grid and reach last-mile, unelectrified communities. Their actual merits alone are strong enough to stand on.

 

 

Nikhil Jaisinghani is an experienced entrepreneur having co-founded Value Development Initiatives, a Nigeria-focused energy infrastructure company, and Mera Gao Power. Experience in both companies has led Nikhil to the driving principle that service businesses rather than product businesses have the greatest potential of reaching the world’s poor. Nikhil is responsible for raising investment at Mera Gao Power.

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