Reaching the Unserved

Policy developments and growth trends in the off-grid space

A key opportunity for renewable energy (especially solar power and bioenergy) lies in off-grid applications. These applications are suitable for unelectrified households in areas where grid extension is neither feasible nor cost effective. To tap this opportunity, a key policy impetus was given by the Jawaharlal Nehru National Solar Mission (JNNSM), released in 2010. Since then, numerous programmes and schemes with different phases have been launched to achieve the targets set in the JNNSM. In addition, programmes have been launched to promote other innovative off-grid applications that were not mentioned in the JNNSM. These programmes/schemes have been floated by both the Ministry of New and Renewable Energy (MNRE) and the Ministry of Power (MoP).

Renewable Watch presents the policy developments that have taken place in this space since 2010 for different off-grid applications such as solar pumps, solar street lights, small-scale solar systems, solar thermal, and biogas plants. It also highlights international cooperation in this area, and the policy initiatives in the microgrid space that will shape the off-grid segment in the coming years…

Under the JNNSM, a roadmap was drawn up to develop off-grid applications in three phases. Phase I was planned for 2010-13 with a target of 200 MW, Phase II for 2013-17 with a target of 1,000 MW, and Phase III for 2017-23 with a target of 2,000 MW. To achieve these targets, the Off-grid and Decentralised Solar PV Applications Programme was introduced by the MNRE in the initial years of the JNNSM. In August 2018, the MNRE released guidelines for Phase III of the programme, covering the years 2018-19 and 2019-20. A total of 118 MW of off-grid and decentralised solar power projects were envisaged under Phase III. This target excluded solar pumps and solar home lights. For solar pumps, a subprogramme, the Solar Pumping Programme for Irrigation and Drinking Water, and later the Pradhan Mantri Kisan Urja Suraksha evam Utthan Mahabhiyan (PM KUSUM), were launched, while the installation of solar home lights was taken up under the MoP’s Deendayal Upadhyaya Gram Jyoti Yojana (DDUGJY) and later the Saubhagya scheme.

Solar pumps

The promotion of solar pumps started in 1992. The segment attracted significant interest under the JNNSM. The installation of stand-alone solar pumps was part of the Off-grid and Decentralised Solar PV Applications Programme till March 2017 and had a significant budget allocation. In November 2016, as a subcomponent of the JNNSM, the MNRE launched the Solar Pumping Programme for Irrigation and Drinking Water, under which the government aimed to install a million pumps by 2020-21. As the cost of solar pumps was considerably higher than that of diesel pumps, the programme focused on disbursing a significant amount of subsidies. A major policy change in this segment came when, in the Union Budget 2018-19, the central government announced the launch of PM KUSUM, a subsidy-driven pump distribution scheme aimed at providing relief from rising diesel costs to farmers.

In February 2019, the PM KUSUM scheme was approved by the Cabinet Committee on Economic Affairs. It was finally decided that the central and state governments would each provide a 30 per cent central financial assistance (CFA) and the remaining 40 per cent would be paid by the farmers. The central government would increase its share of assistance to 50 per cent in Sikkim, Himachal Pradesh, Uttarakhand, Jammu & Kashmir, Lakshadweep and the Andaman & Nicobar Islands.

The scheme now aims to add 30.8 GW of solar and other renewable energy capacity by 2022. The scheme has three components. Component A envisages the setting up of 10,000 MW of decentralised ground-mounted grid-connected renewable power plants of up to 2 MW each. Component B envisages the installation of 2 million stand-alone solar-powered agricultural pumps of up to 7.5 HP capacity each. Component C envisages the solarisation of 1.5 million grid-connected agricultural pumps of up to 7.5 HP capacity each.

In November 2019, detailed guidelines were issued to define applicable standards and specifications, with the aim of easing the implementation of Component C. This was followed by amendments to the guidelines for the implementation of Component C in July 2020, to allow system integrators to take part in the bidding process. The amendment added that the implementing agency should invite bids for the empanelment of vendors through a transparent bidding process. Currently, solar pumps fulfilling the MNRE specifications can be installed under the scheme. However, in order to promote technology growth, the MNRE has decided to permit the installation of innovative stand-alone solar pumps in test mode. According to the MNRE, as of September 2020, a total of 260,574 off-grid solar pumps have been set up in India.

The states that have provided a positive policy impetus to the segment include Rajasthan (Rajasthan Solar Energy Policy, 2019, with a target solar pump capacity of 1 GW by 2024-25), Bihar (Policy for Promotion of New and Renewable Energy, with a target of 10,000 off-grid solar pumps by the end of 2021-22) and Chhattisgarh (Saur Sujala Yojana 2016, with a target of 11,300 solar pumps).

Solar street lights

Initially, the JNNSM had set a target to deploy 20 million solar lighting systems in rural areas by 2022. The objective of the Off-grid and Decentralised Solar PV Applications Programme (Phase III) is to install 300,000 solar street lights across the country by 2020, with special emphasis on areas that have no facility for grid-connected street lighting systems such as the north-eastern states and left wing extremism (LWE)-affected districts.

In the same segment, as a subscheme under the Off-grid and Decentralised Solar PV Applications Programme, the MNRE launched the Atal Jyoti Yojana (AJAY) to illuminate the dark regions of the country by setting up solar street lights. Phase I of AJAY was implemented from September 2016 to March 2018, and rural, semi-urban and urban areas that had less than 50 per cent grid connectivity in Uttar Pradesh, Assam, Bihar, Jharkhand and Odisha were illuminated with 7 W solar LED street lights. The second phase was implemented from 2018-19 to 2019-20 and has now been extended to March 2021.

Phase II of AJAY targets the installation of 304,500, 12 W solar street lights in Uttar Pradesh, Bihar, Jharkhand, Odisha and Assam (which were already covered in Phase I), and additionally the hill states of Jammu & Kashmir, Himachal Pradesh and Uttarakhand; the north-eastern states including Sikkim; the Andaman & Nicobar and Lakshadweep islands; and parliamentary constituencies covering 48  aspirational districts (other than those covered under the hill states and islands). About 75 per cent of the cost is being borne by the MNRE, and the remaining 25 per cent is being provided from the Members of Parliament Local Area Development Scheme funds. According to the MNRE, as of September 2020, about 771,235 solar street lights have been set up.

Off-grid small-scale solar plants

The JNNSM had planned to set up stand-alone rural solar power plants in Lakshadweep, the Andaman & Nicobar Islands and Ladakh. The mission also encouraged the promotion of other off-grid solar applications to meet power, heating and cooling energy requirements that were previously being met by diesel and other fossil fuels. The Off-grid and Decentralised Solar PV Applications Programme set a target of setting up 100 MWp of off-grid solar power plants.

In July 2020, the MNRE issued guidelines for the implementation of off-grid solar power plants under the renewable energy service company (RESCO) and power purchase agreement models. According to the guidelines, under Phase III of the Off-grid and Decentralised Solar PV Applications Programme, off-grid solar power plants of up to 25 kW each can be installed in areas where grid power has not reached or is not reliable. The scheme applies to only the north-eastern states for the installation of off-grid solar PV plants through the RESCO model, with a CFA of 90 per cent of the benchmark cost of the system. The MNRE has proposed that under the RESCO model, the vendor would install and operate solar power plants of up to 10 kWp capacity for at least 10 years, and solar PV plants of a capacity of above 10 kWp for at least 15 years.

Meanwhile, from 2017 to 2020, the Ministry of Textiles implemented the PowerTex India Scheme for the development of the powerloom sector. This involved the implementation of a solar energy scheme in which capital subsidy was provided for the installation of both on-grid solar PV plants (without battery backup) and off-grid solar PV plants (with battery backup) by powerlooms that have up to eight looms. According to the MNRE, as of September 2020, approximately 216 MW of off-grid solar systems have been set up in total.

Solar lamps

Under Phase III of the Off-grid and Decentralised Solar PV Applications Programme, a target was set for providing 2,500,000 subsidised solar study lamps to students in the backward areas of the north-eastern states and LWE-affected districts.

The MNRE also implemented a scheme for 7 million Solar Study lamps, aimed at providing rural students with high quality and affordable clean light. The scheme was implemented in five states – Assam, Bihar, Jharkhand, Odisha and Uttar Pradesh – which have more than 50 per cent unelectrified households as per the 2011 census. Under this scheme, blocks with more than 50 per cent kerosene-dependent households were covered. The target under this scheme has been achieved.

Currently, under the MoP’s Saubhagya scheme, solar PV-based stand-alone systems are being provided to households located in remote and inaccessible areas of the country where grid extension is not feasible or cost effective. Each of these households is to be provided with up to five solar-based LED bulbs, a DC fan, and a DC power plug free of cost. Earlier, under the MoP’s DDUGJY as well there were provisions for supplying solar PV-based stand-alone systems to remote villages. According to the MNRE, as of September 2020, 1,721,343 solar home lighting systems and 7,699,914 solar lanterns have been distributed.

Solar thermal

The JNNSM’s initial solar thermal application targets were 15 million square metres by 2017 and 20 million square metres by 2022. Until 2014, the MNRE offered 30 per cent subsidy, which was a major growth driver for the segment. However, the launch of the more efficient evacuated tube collector solar water heaters in October 2014 led to the discontinuation of the subsidy so that the segment could become self-sustainable. Following this, there was a drop in the growth rate of the segment.

In 2018, the MNRE decided to continue its off-grid and decentralised concentrated solar thermal technologies scheme for community cooking, process heat, and space heating and cooling applications in industrial, institutional and commercial establishments for the period 2017-18 to 2019-20. For 2019-20, a target of 40,000 square metres was set. The programme is applicable in both rural and urban areas and focuses on promoting off-grid and decentralised systems of any size, including hybrid systems, to meet heating and cooling energy requirements and generate electricity from solar thermal systems.

Off-grid biogas systems

The Biogas Power Generation (Off-grid) and Thermal Energy Application Programme was initially launched for the period 2017-18 to 2019-20. In June 2020, the programme was extended to 2020-21. Its objective is to promote off-grid decentralised biogas-based systems of capacities ranging between 3 kW and 250 kW, as well as off-grid biogas plants ranging between 30 cubic metres and 2,500 cubic metres for power generation and heating or cooling applications.

Moreover, the New National Biogas and Organic Manure Programme (initially 2017-18 to 2019-20, now extended to 2020-21) focuses on providing lighting and clean cooking fuel for kitchens, meeting the thermal and power needs of farmers and individual households, and setting up small-scale biogas plants of 1 to 25 cubic metre capacity. According to the MNRE, as of September 2020, over 5 million biogas plants have been set up.

International cooperation

In 2018, the central government approved the Scale Up of Access to Clean Energy programme for 2018-19 and 2019-20. The programme was launched with the support of the United Nations Development Program and the Global Environment Facility, and aimed to enhance the use of reliable and affordable renewable energy for rural productive purposes in unserved and underserved areas in Assam, Madhya Pradesh and Odisha. It focused on serving poultry, fishery, horticulture, dairy, and biomass-based local businesses, as well as cottage and other village industries, among others, with renewable energy applications such as solar dryers, solar cold storages and solar aerators. The total budget of the programme was Rs 700 million. It had a target of serving 15,000 beneficiaries in 2018-19 and 15,000 beneficiaries in 2019-20.

The way forward

So far, much of the government and industry focus has been on large-scale renewable energy projects, given their importance in creating economies of scale and a competitive marketplace. However, smaller decentralised systems are now gaining slow but steady traction, especially in remote regions. The emergence of various market players with innovative business models and cost-effective solutions has provided the much-needed impetus to the off-grid renewable space, especially given that utility-scale projects suffer from challenges related to power offtake, transmission, land and financing.

Going forward, the major policy developments and debate in the off-grid space will likely take place in the microgrid segment. Even though the grid has electrified all erstwhile unelectrified villages in India (according to the GARV dashboard), frequent outages are still a major issue. Therefore, rural customers are willing to pay a higher tariff for more reliable electricity from off-grid micro- and minigrids.

However, the extension of a reliable grid poses a challenge for microgrid developers, underlining the need for a good policy framework. To this end, in 2016, the MNRE issued a draft policy for mini- and microgrids, aiming to set up 500 MW of capacity in this space. The draft policy attempts to solve many prevailing challenges in the segment and provides for grid connection of microgrids as well as notification of areas where grid extension is not planned. However, uncertainty over financial assistance to the microgrid segment remains. Till date, the draft policy has not been finalised.

Going forward, microgrids will play a crucial role in shaping the off-grid segment. And this may well become the defining moment for the off-grid growth story in the coming decades.

By Sarthak Takyar



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