Energy access is a key challenge facing India, where many people still live without proper electricity, especially in rural areas and remote hilly regions. Even in areas where it is available, it is unreliable with frequent and prolonged power cuts. Owing to their ease of installation, off-grid solar systems are an ideal fit for such locations. They also do not require transmission systems. The Ministry of New and Renewable Energy (MNRE) issued draft guidelines in May 2020 for the implementation of off-grid solar power plants under the renewable energy service company (RESCO) model. These guidelines were released in the context of a recent announcement made by the MNRE in April 2020, when the MNRE extended Phase III of the Off-grid Solar Photovoltaic Applications Programme to March 31, 2021. Under the extended scheme, off-grid solar parks will be installed only under the RESCO model and only in the north-eastern states. Central financial assistance (CFA) will be available for up to 90 per cent of the benchmark cost.
Off-grid programme
The off-grid solar programme is one of the oldest programmes of the MNRE aimed at providing solar PV-based applications in areas where grid power is either not available or is unreliable. Applications such as solar home lighting systems, solar street lighting systems, solar power plants, solar pumps, solar lanterns and solar study lamps are covered under the programme. Under Phase III of the programme, off-grid solar power plants of individual size up to 25 kW can be installed in areas where grid power has not reached or is not reliable. Such plants are aimed at providing electricity to government schools, hostels, panchayats, police stations and other public service institutions.
In the case of isolated off-grid systems, only energy efficient equipment such as LED lights and brushless electric motor fans should be used by the beneficiary in order to optimise the cost and size of the solar plant. The solar capacity should be sufficient to meet the power requirement of the beneficiary, including the charging of batteries. Further, battery backup of two days should be available. The solar power supplied from the system will be metered at the point of delivery and a remote monitoring system will be deployed with the system. Off-grid solar systems can also be used for shifting the load during emergencies. Thus, they require energy efficient equipment, which can be supplied through separate electric circuits. For these systems, net metering can be provided for feeding surplus power to the grid. All solar power plants sanctioned under the programme will be provided with remote monitoring systems. Access to the remote monitoring system will be provided to the implementing agency and the MNRE. The implementing agency will submit quarterly performance data of the solar power plant to the MNRE in a format prescribed by the MNRE.
Systems installed under the programme must meet technical specifications and construction standards as specified by the Bureau of Indian Standards and the MNRE from time to time. Non-compliance will be taken seriously, penalising to the extent of blacklisting the vendor. Only indigenously manufactured PV modules should be used for the projects.
RESCO arrangement
The systems will be operated under the RESCO model to ensure their proper repair and maintenance and promote operational efficiency. Since the beneficiaries of the solar plants are public service institutions, it will be difficult to arrange beneficiary shares. Moreover, after the guarantee period is over, continuing operations and maintenance of the plant will be a challenge due to financial and technical constraints.
Proposals for the installation of off-grid solar power plants will be submitted by the state nodal agencies. These proposals will be placed before the screening committee once a quarter and the projects recommended by the screening committee will be sanctioned. The RESCO will be selected through an open competitive bidding process to be undertaken by the implementing agency. Bidders will be invited to submit proposals for the installation of off-grid solar power plants at the specified location for 10 or 15 years based on plant capacity. The bidder quoting the lowest tariff for the supply of power to the beneficiary organisation will be eligible for the award of the project.
The chosen power producer and the beneficiary organisation will then sign a power purchase agreement (PPA). The RESCO will be responsible for designing, installing, operating and maintaining the solar power plant and supplying the daily minimum guaranteed power (DMGP) to the beneficiary, while the beneficiary will make the payment for the power at a tariff decided through the bidding process on a monthly basis. If the power producing RESCO fails to supply the DMGP or the power required by the beneficiary, whichever is less, the developer will be liable to pay a penalty for the shortage of the DMGP at the rate specified in the PPA.
The solar project will be installed and commissioned by the selected RESCO within three months of the placement of award by the implementing agency. A maximum extension of three months can be provided to the RESCO, only if the reasons for the delay are beyond the control of the RESCO. Any further delay will result in the cancellation of the award.
Cost and finance
On an average, the life of PV solar panels is expected to be 25 years. However, the other equipment used to set up an off-grid solar plant, such as batteries, charge controllers and maximum power point tracking inverters, receives a guarantee of only five years from vendors. A RESCO model eases the cost burden as the vendor will install and operate the solar power plants with a capacity of up to 10 kW for 10 years and projects of more than 10 kW for 15 years. After the completion of the contract period, the plant will be handed over to the beneficiary in an operating condition.
The benchmark cost set by the MNRE covers the cost of the complete system, transportation of material to the site, installation, commissioning, insurance and maintenance for a period of five years. The MNRE will provide the beneficiaries with CFA on the benchmark cost. The RESCO selected through competitive bidding will install and operate the plant, and supply the DMGP to the beneficiary organisation at the discovered tariff for the aforementioned period. The beneficiary will make payment to the RESCO according to the DMGP. There are two different financial models for operating a solar power plant depending on the payment of CFA. One model is the upfront payment of CFA. Under this model, CFA of 90 per cent of the benchmark cost will be paid upfront after the successful commissioning of the plant. The second model is the payment of CFA in instalments to enable availability of funds at the time of replacement of batteries. For projects under 10 kW, 50 per cent CFA may be disbursed at the time of commissioning while the remaining can be given at the end of five years of operation. For projects above 10 kW, 50 per cent CFA will be released at the time of commissioning, 25 per cent at the end of five years and the remaining 25 per cent at the end of 10 years.
To estimate the tariff, a representative system of 4 kW has been considered. The average daily solar power generation per kW of solar panel is considered 2.5 kWh, since the north-eastern region has fewer sunny days and low solar radiation levels. As per the calculation, the DMGP was discovered to be 10 kWh. With battery back-up of 7.2 VAh per watt, the total battery requirement will be 28.8 kWh.
The way forward
Off-grid solar projects are a very promising solution for meeting the country’s energy requirements, especially of remote regions in the Northeast where grid connectivity is a challenge. However, this region faces location-related obstacles and cost concerns associated with the setting up of off-grid solar projects. The MNRE’s guidelines, CFA and the RESCO model can help tackle these issues, thus increasing the uptake of off-grid solar projects.
By Meghaa Gangahar