Connecting the Unconnected

Off-grid segment witnesses slow but steady growth

Until recently, a large part of the population in many parts of the country still centred their activities from sunrise to sunset, as there was no electricity in their villages. However, with improving economy, technology, accessibility and administrative thrust, such remote regions are rapidly emerging out of darkness into light. Off-grid solutions have played a significant role in making lives in the remote areas easier, brighter and economically more inclusive in the mainstream development of the country. From lighting to pumping and cooking to heating, off-grid solutions are being used for nearly most of the commercial, industrial and residential applications in the areas that are yet to access the electric grid connectivity of the country.

Off-grid solutions provide a financially sound alternative to the limited grid-connected power that is unable to reach areas which are geographically remote or in difficult terrains and/or have low population density that makes grid connection economically unfeasible. Given the potential and the government’s aggressive focus on renewable power generation, the off-grid renewable energy segment has been given a new lease of life in recent times.

This segment has a significant market potential, considering estimates that there are nearly 80 million powerless households in the country. The government and the private sector intervened to take up the cause of powering the unconnected areas in the country. Multiple policies have since been introduced and implemented by the government for various technologies, from solar to wind hybrids to biogas and small hydro.

Current status

As part of the government’s efforts to provide sustainable solutions to remote areas, all sources of power generation are being promoted through clearly laid out targets and constant monitoring of the schemes implemented to that effect.

  • Solar PV systems: Solar has been the most prevalent technology for off-grid solutions, as most of the country receives more than 300 days of sunlight in a year. Increasingly affordable solar power generation has also contributed to the uptake of this technology for various purposes.

Under the Jawaharlal Nehru National Solar Mission (JNNSM), the government aims to install 3,200 MW of off-grid solar systems by 2022 in three phases. Under Phase I (2010-13), the government installed 68.4 MW of off-grid solar technologies, whereas during the ongoing Phase II, against a target of 100 MW, 48.13 MW has already been installed, bringing the cumulative solar photovoltaic off-grid capacity to 361.98 MW.

  • Solar irrigation pumps: India’s economic dependence on agriculture has given rise to an unexploited market in the form of solar irrigation pumps. Uncertainty and unreliability of grid-connected power and the expensive nature of diesel-based pumps for irrigation has further opened up the market to not only remote, but also mainstream areas opting for solar technology to pump water for irrigating fields.

To this effect, the Ministry of New and Renewable Energy (MNRE) launched the Solar Pumping Programme for Irrigation and Drinking Water Scheme under which the government aims to install a million pumps by 2020-21. Over 62,000 solar pumps currently operate in the country, with more than 50 per cent of these installed in the past one year, including 14,000 pumps sold under the MNRE scheme. Heavy subsidies are provided to encourage the installation of the technology, with only 5 per cent-20 per cent of the cost of the pump being borne by the user, the rest being divided between the state and the central government agencies. Subsidies are an important part of the solar pump market, given the high cost of the equipment – a 3-5 horsepower pump costs Rs 500,000-Rs 700,000. Compared to this, a diesel pump with the same specifications costs merely Rs 30,000 to Rs 50,000, making it financially preferable, despite its operational cost being higher. Therefore, the subsidy programme for solar pumps assumes greater significance for their deeper penetration.

  • Solar water heaters: This segment has experienced enormous growth over the past few years to reach an installation of 8.9 million square metres in 2016. Given the subsidies provided and the awareness programmes, the residential sector saw huge uptake of the technology. Increasingly, commercial sectors have also been leaning towards solar water heaters as a viable option. However, after the subsidy for solar water heaters was discontinued by the government in October 2014, there was a drop in the growth rate of the segment, coupled with the strong competition from Chinese manufacturers. It is feared that this may impede the achievement of the JNNSM targets of 15 million square metres by 2017 and 20 million square metres by 2022.
  • Solar lighting: Off-grid solutions for lighting include solar lanterns, solar home systems (SHSs), solar street lighting and decentralised renewable energy (DRE) systems, with a target to deploy 1 million systems by the end of Phase II of the JNNSM. With increased acceptance of SHSs and DRE, the solar lighting segment is expected to add about 5 million units by 2018 to those installed by 2014. By 2018, it is likely to grow at nearly 3 million per annum, creating a huge market opportunity. Financing options remain a concern in the solar lighting segment. The solar lantern is sufficiently useful with mobile charging points and is priced low, about Rs 800 to Rs 1,400 per unit. As compared to this, the SHSs, which have seen greater adoption, cost about Rs 4,000 per unit. However, irregular and low income prevents people from investing in these systems. Conducive measures to incentivise and finance SHSs and DRE must be taken to accelerate their adoption.
  • Biomass systems: Biomass is an easily available resource in rural areas, making it a preferred energy source. The government provides monetary incentives for the adoption of clean biomass gasifiers and for cogeneration from biomass resources. The MNRE has a target of 60 MW for cogeneration technology adoption in 2016-17, and a rural installation target of 2 MW for biomass gasifiers, while that for industrial application is at 8 MW. Of the total 70 MW target for biomass systems, only 2.4 MW has been installed in the industrial gasifier segment so far in this year. The cumulative installed capacity for biomass systems stands at 836.7 MW, of which cogeneration has the biggest share with 651.91 MW, followed by industrial gasifiers at 166.64 MW and rural gasifiers at 18.15 MW.
  • Microgrids: An emerging sector for the off-grid segment is the installation of microgrids for remote communities. The MNRE has a target of deploying 500 microgrids over the next five years. However, the absence of a long-term comprehensive policy framework may hinder the achievement of the target. Also, the expansion of the country’s grid network is seen by developers as a threat to the future of microgrids due to the ambiguity over their fate, once the grid reaches the remote areas. Since the developer has to install the complete transmission and distribution network for the area, the financial risk is significant, owing to unclear policies. However, as a model for off-grid remote areas, microgrids serve as a complex, yet financially viable, alternative solution.

Challenges and the future

Despite an increasing need for off-grid solutions, policymakers often keep this segment at the end of their priority list, overshadowed by grid-connected systems and programmes aimed at power transmission and evacuation networks. The role of this segment in the “Power for All” programme by various states is still ambiguous and policies unclear to further the adoption of these systems.

One of the key challenges remains financing and achieving economies of scale. Most companies in the off-grid segment are still in the growth stage, with limited manufacturing capabilities. To enable larger manufacturing, greater funds are required and more profitability is needed, which will come only from scaling up of operations. The segment is often found embroiled in a vicious cycle, preventing focused progress.

The removal of subsidies from maturing markets within this segment would allow for better fund allocation to the emerging markets. Greater policy-based collaboration between off-grid developers and the government will enable the adoption of technologies, allowing companies to reach economies of scale that will further reduce costs. Off-grid technology also has considerable advantages to be developed into a parallel means of harnessing renewable sources of energy, while also ensuring sustainable power for off-grid areas.


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