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The role of microgrids in India

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Credit: Photo by Naveed Ahmed on Unsplash

India is a growing country of 1.3 billion people. The energy needs are increasing and people from all corners of the country have started engaging in small businesses and demanding better infrastructure. The country, however, only provided electricity to 85% of the population until 2016; consequently, more than 200 million people were disconnected from a power grid.

Microgrids are small and localized versions of a power grid for regions with no or poor central grid connection. Long before the concept caught up with the world, people in India were using microgrids and minigrids with diesel generators. In the absence of electricity, they were powering small commercial facilities, farms and villages. But now, the focus has moved towards making the microgrids renewable-powered and expanding their reach.

Status of electrification

In 2018, Indian Prime Minister Narendra Modi declared India a 100% electrified country. However, this claim is based on a definition that many may not agree with, and is sometimes challenged by the beneficiaries themselves. A village is declared 100% electrified when 10% of all homes and public offices get electricity. While this is a big step in connecting a village to a central grid, it does not really mean that 100% of the population is getting electricity.

This is where microgrids come in. For villages sparsely connected to the grid, or getting irregular power supply and frequent blackouts, microgrids are an opportunity to continue with everyday tasks of life. Local people value the uninterrupted electricity that they offer and are ready to pay for their benefits.

As an example, in a village in Jharkhand, many people are purchasing electricity through a solar-battery powered microgrid, despite having a grid connection at home. The reason for this is due to the frequent power cuts that can last for days and disrupt small businesses like a local store or a poultry farm.

Microgrids are not as popular in bigger towns and cities as they are in more distant and smaller locations, despite irregular power connections. These cities are well-connected to the central grid, so perhaps residents have hopes of getting uninterrupted power one day and do not see much benefit in investing in an alternate system. However, to deal with blackouts, it is common to use diesel generators.

Economic benefits and challenges

Economics is the reason why such a large population has remained without a central power grid. The demand from some sparsely populated regions, where the capacity to pay bills is low, does not justify the investments on the supply side, as building a complete transmission and distribution system takes up immense land and money.

The generation costs in a microgrid depend on location, capacity, installation costs, etc., and so it is difficult to generalize the price per kWh from a microgrid. Although microgrids have their benefits, the electricity is not cheap. Combining with storage to counter the intermittent nature of renewable sources often makes them costlier than grid electricity. For example, in a 2016 study at Stanford, it was concluded that the average price of grid electricity in village in Gujarat is $0.06/kWh; however, the integration of a solar-battery microgrid would cost the village up to $0.38/kWh. Nevertheless, renewables would still be a good replacement against diesel-only power generation that can cost up to $0.57/kWh.

Some believe that the benefits outweigh the additional cost. The electricity eventually enables local shopkeepers to stay open for longer, as they no longer depend on the daylight. In a nation with agriculture as the dominant source of livelihood, electricity from microgrids has also promoted a shift to solar pumps.

Despite all benefits, setting up a formal network of microgrids in India is not without its own challenges. There are regulatory and bureaucratic hurdles to cross, as well as the challenge of educating people who are receiving electricity for the first time, and encouraging them to adopt a non-wasteful behavior.

From a business perspective, there are challenges around scalability, power theft and an eventual extension of the central grid. States often do not disclose how the central grid will expand, making microgrid investments tricky for developers. In many cases, microgrids also face high O&M costs due to little availability of local technicians to look after the systems.

Microgrids in India

India has installed solar microgrids providing around 2MW of electricity so far but has ambitious plans. While the earlier plan of constructing microgrids to provide 500MW worth of power by 2022 was shelved, the government soon plans to create a new policy.

Large private investments are flowing in too, such as the partnership between Tata Power and Rockefeller Foundation to set up 10,000 microgrids by 2026. This project is expected to support 100,000 rural enterprises, create 10,000 new green jobs and provide irrigation for over 400,000 local farmers.

Role of microgrids in India’s clean electricity

Microgrids have the potential to boost the economy by bringing electricity to remote, Tier 2 and Tier 3 regions and allowing small-medium businesses to grow. For example, in remote Himalayan regions of Ladakh, solar microgrids have boosted tourism income by about $24,000 in close to two years of being deployed.

India currently has a generation capacity of 375GW with 70% coming from coal. As this system, hopefully, plans for an overhaul and more clean energy comes in, a mix of central grid and microgrid should be looked at to fulfill the need. As noted by Prof. Mahesh Bhave, based on some approximate numbers, this can be achieved with 85,000 2MW microgrids, providing 170GW at a cost of $430 billion. To put this number in perspective, it takes $2 billion to construct a 1.6-GW coal plant in India. Generation is therefore cheaper than microgrids, but it is worth remembering that the cost of the latter is coming down quickly with time as more scale is reached. Coal also enjoys more government subsidies than renewables and places an enormous burden on climate and local environment, which is unaccounted for in its cost.

To conclude, as India plans to bring power to more and more people, it is important that this expansion happens with green resources in a way that takes us towards a decentralized smart grid and promotes local businesses without impacting the environment. So the question is not of why, but how, to make that happen.