Micro Grids, Macro Gains

A viable option for small habitations

A microgrid is a group of inter-connected loads and distributed energy resources within clearly defined electrical boundaries that can be operated in a controlled and coordinated way. Microgrids can either be connected to the main grid or function as a stand-alone distribution network. In rural areas with grid access, microgrid systems can accommodate multiple generation sources, especially solar, biomass, small-hydro and wind; non-renewable sources such as diesel; and hybrid sources such as solar-diesel. Remote villages, typically with small populations, low electricity requirements and no grid access are also suitable for the installation of microgrid systems. Distributed microgrids prove to be a more economical and an environmentally cleaner solution than grid transmission networks.

The Ministry of New and Renewable Energy (MNRE) provides a capital subsidy of 30 per cent of the cost of installation of solar micro and mini-grid systems. Thus, for a 10 kW microgrid (direct current [DC]), the MNRE offers Rs 105 per watt, and for systems with a module capacity of 10 kW to 250 kW, it offers Rs 90 per watt. In addition, the systems come with a minimum warranty of five years in the rural and remote areas of the country.

Current status

So far, about 125,000 rural households have been connected to microgrids. Chhattisgarh has implemented the largest number of minigrids in the country, covering more than 1,400 off-grid habitations. Initially microgrids were set up mainly by government agencies like the West Bengal Renewable Energy Development Agency and the Chhattisgarh Renewable Energy Development Agency, but today a number of private sector players have also entered the segment. While solar has been the primary source of renewable energy generation for microgrids, biomass has also seen a considerable increase in uptake. Overall, although microgrids have gained traction in the recent past, its potential remains under-utilised due to the absence of appropriate energy storage technologies.

Key players

Gram Power delivers electricity through smart grids that use an array of solar panels connected to a makeshift brick substation. Electricity from the substation is carried to houses connected to the smart grid through wires on wooden poles. Smart meters are fitted in all households. The company offers consumers a prepaid system to buy power. Gram Power has a 5.5 kW power plant catering to nearly 80 households. The plant entailed a cost of around Rs 25 million.

Mera Gao Power provides DC electricity to villages using solar photovoltaic (PV) panels. It provides sufficient power for two light bulbs and a mobile phone charger. The company also provides LED bulbs and chargers compatible with DC to its customers. The installation of the microgrid takes only a day and costs about $900.

DESI Power uses various renewable energy technologies and installs suitable combinations depending on the requirements of the villages. The company has installed small pre-packaged solar PV power supply units with a capacity of 1.2 MW each at six locations. Revenue is collected on a daily basis to give flexibility to customers. The company plans to set up 1,000 tiny grids on a commercial basis across Bihar.

Omnigrid Micropower Company is engaged in developing small-scale renewable energy power plants. The company sells electricity through microgrids installed at telecom tower sites in rural areas. It currently provides power to about 70 cellular towers and adjoining villages.

Gram Oorja Solutions Private Limited operates microgrid units across various villages in Karnataka and Maharashtra. Once the microgrid is installed, the houses are connected to the single-phase grid through distribution poles. The company has successfully installed about 10 microgrids in the two states. Gram Oorja has a power plant with a capacity of 9.36 kW catering to the energy requirements of around 36 households, street lights and pumps.

Issues and challenges

The major challenge faced by microgrid developers in the country is the high upfront costs of setting up the system. Government subsidies, although substantial, are difficult to obtain, and timelines for the disbursement of funds are uncertain, creating a strong need for long-tenor project finance.

A 200 watt DC system, sufficient to provide lighting and mobile charging facilities, costs Rs 120,000 to Rs 200,000. A kW-scale mini-grid system costs between Rs 3 million and Rs 10 million. The logistics for remote areas further adds to the cost.

Most companies and projects look for long-term financing (typically 7-10 years) due to the difficulties in installing  and operating the plants. However, banking institutions rarely provide such loans. In addition, the perceived risks regarding the renewable energy sector and the lack of adequate financial history for early-stage enterprises make it even more difficult to secure financing. This is partially because of low government support and the fact that the microgrid segment is still at a nascent stage. At present, the only support provided by the MNRE to resolve the issue of high installation costs is capital subsidies.

Enterprises also face the challenge of ensuring affordability and collecting regular payments from consumers. Since most of the projects are implemented in small, tightly-knit villages, a general sentiment of default can quickly spread and sabotage the entire project. Payment collections can make up around 50 per cent of the total operational costs. High default rates have a significant impact on cash flows and profit margins, which are crucial to recover upfront investments faster.

The lack of clarity in the government’s grid extension plans has led to scepticism about the long-term viability of microgrids. Decentralised renewable energy enterprises simply cannot compete with the lower and often subsidised cost of grid electricity. Some enterprises, therefore, look only to operate in the remote off-grid regions with low probability of grid extension. Such subsidies and grid uncertainty act as an impediment to the viability and adoption of microgrids in areas that have poor grid connectivity.

Key enablers

The energy-as-a-service model entails the deployment of low-cost DC power management devices, which can monitor power usage and distribution. Of late, DC minigrids have been set up in small villages with just 12 to 15 households. DC minigrids have solar panels and a battery bank. Such mini-grids are more suitable for meeting the lighting needs of small-scale projects, as well as for rationalising the cost of transmission lines in small villages. In addition, these DC systems do not need an inverter, which otherwise requires a lot of maintenance, adding significantly to the cost of microgrids.

Microgrid companies have started investing in new payment mechanisms (such as smart metering, prepaid metering and mobile payments) that automate the collection process. For off-grid enterprises, payment collection has been a time-consuming and labour-intensive process. Some enterprises have reported a 60 per cent reduction in collection costs through better payment systems.

One such example is Neechli Babhan, a small village in Rajasthan’s Pali district, which has smart meters installed in 80 of its 150 houses. These meters help people to use electricity judiciously. Meanwhile, prepaid metering gives real-time information about the balance credit, just as prepaid mobile phones do. Microgrid companies are also using new technologies to their benefit, for remote monitoring,  reducing theft, etc. A case in point is the smart nanogrid installed at Chhotkei, Odisha by SunMoksha. It uses smart sensors, which helps the company provide real-time remote monitoring and technical support. A command centre has been set up in the village, which is operated by trained staff, usually a villager. The involvement of stakeholders reinforces the trust of the villagers in the company. Besides, SunMoksha has laid an optical fibre network that provides Wi-Fi services. Further, villagers can access the  company’s mobile application and make timely bill payments.

The way forward

A new and upcoming concept is that of urban microgrids. Essentially, urban microgrids aim to reduce a city’s dependence on the grid to be better prepared for climate change and natural calamities as well as shift towards a cleaner form of energy. These are more reliable during emergencies and can be controlled depending on the demand patterns of a specific institution. The locations most suited for the installation of urban microgrids are telecom towers, hospitals, universities, business parks, residential complexes, government institutions, etc.

Grid extension and the establishment of microgrids with efficient storage systems need to be pursued in the long run in order to ensure the sustainability and scalability of projects. Although grid extension is expensive and time-consuming, it will prove to be a cheaper and more viable option eventually. Further, microgrids should be deployed in collaboration with discoms, since people trust them to provide quality service in a fair and equitable manner. This will help reduce the number of projects that fail to take off. Better financing and increased government support are crucial for the adoption of microgrids in India.


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