The new Indian government seeks to provide all Indians with reliable 24×7 power before the next elections in 2019. According to estimates, there are still 300-400 million Indians without access to electricity.
- The government has two broad options in trying to meet the target. It can extend the grid to un-electrified households (and ensure there is sufficient power supply in the grid) or it can develop distributed solutions, typically micro-grids
- In the end, determined by the location and accessibility of a household, it will be a mix of both the approaches
- But where should the main thrust of India’s electrification plan be?
In comparing grid extension and micro-grids (including solar home systems), the following factors should be kept in mind:
Speed of deployment: This is a developmental question. And the essence in this case is timeliness. Without access to power, development will be stalled. In certain places, extending the grid can be implemented faster, in others, a micro-grid implementation will be faster. On the whole, however, the fact that India still has so many un-electrified households can be tallied against the dominant grid electricity provision model. The micro-grid model is still largely untested
Cost of (reliable) power per kWh: For a comparison of the landed cost of power (LCOP), the generation and transmission/distribution costs need to be compared. Typically, grid power can be generated at a lower cost (more fuel choices and scale). However, this power needs to be transported to the point of consumption. This requires building the last mile infrastructure (distribution grids). Also, in certain parts of the country transmission and distribution losses are above 30%. For micro-grids, the key cost driver is the challenge to provide uninterrupted power as this might require expensive storage solutions.
Cost assessments: Micro-grid power based on a mix of solar, wind, biomass, diesel and storage for a 10 MW system could cost around INR 12-15/kWh. The cost of new coal power is INR 6/kWh. By adding 20% T&D losses, it amounts to INR 7.2 kWh, which is approximately half the generation cost of mini-grid power. A deeper analysis would need to take into account, the cost of building new distribution infrastructure and define a rough cut-off point, beyond which it is cheaper to go for a micro-grid.
Climate effect of each choice: This depends on the technology used. Renewable energy technologies (and also diesel gen-sets) lend themselves more to smaller solutions as needed in micro-grids. Fossil (mainly coal) powered plants to be efficient need to come in minimum sizes that make them useful only for grid power. Thus, micro-grids – typically built around renewables, plus perhaps diesel and storage – are more climate friendly.
If we assume that micro-grids produce entirely clean power (no diesel), then they reduce emissions significantly. India, because of its high share of coal, has a power specific factor of 1.33 kg of CO2/kWh. If we assume that 300 million people will get access to electricity and then consume around 10% of the power of – by global standards very low – Indian average (680 kWh/year), the carbon savings of mini-grids will be in the range of 27 million tons per year. This is about 1.3% of India’s emissions.
Further (smaller) factors: At some point in the future, micro-grids could be connected to the grid and essentially become tail-end power plants. In that case this would help stabilize the grid and reduce losses. Micro-grids would also provide a certain degree of local autonomy and employment. They could be termed as more “democratic”.
While comparing mini-grids and grid extension it is important to keep in mind that these are fundamentally different in several ways: while building the grid is an established activity with a strong ecosystem of engineering and finance and clear commercial terms and tasks; micro-grids are still a relatively new model. Currently there are quite a large number of players testing the best way to commercially and technologically implement them (and operate and maintain them). Success will depend crucially on whether a certain degree of scalability through modularization can be achieved. Lenders and investors need to get convinced.
Also, grid extension is an infrastructure play, whereas micro-grids rely crucially on business-models that provide the right incentives for ongoing operations. They are a consumer solution product.
From a political point of view, it seems easier to plan and implement a known grid extension scheme with large individual projects which can be directly controlled and allocating funds becomes easy. Creating micro-grids, on the other hand, requires much more patience and analysis. If the underlying business models are not strong, then deploying large funds will merely create short-term bubbles (perhaps comparable to some microcredit schemes).
However, given the persistent failure of earlier attempts to provide grid power to around a quarter of its population through the power grid, perhaps it is time to try something new?