11/22/2013

Conference on
The Business of Off grid Lighting in India
22 November 2013
IFMR, Chennai

Business Models for Off grid solar

for Electricity Access in Rural/Urban
India
Anoop Singh
Associate Professor

Dept. of Industrial and Management Engg.

IIT Kanpur

Electricity Access Left outside the Grid

CPSUs

IPPs

Captive

T & BS
Regulated
Market

D & RS

Note: Arrows Represent Contracts

Unregulated Informal Supplies

11/22/2013

Emergence of Informal Electricity Suppliers

Areas not served by distribution utility
Unaffordability
U ff d bilit tto pay access fees
f
Operational difficulties
Lack of infrastructure
Quality of Supply
Erratic,, unreliable

Emergence of Informal Electricity Suppliers

(Contd.)
Micro entrepreneurs fill the need gap but
Serve
S
as a stop
t gap
Charge exorbitantly high rates
No quality standards, precautionary measures
observed
Increase financial burden on state utility by
contributing to T&D losses (in case of wire taps)
Non regulated markets

11/22/2013

Alternatives in Informal Markets

Users pay far higher prices for these
alternative sources

Entrepreneur supplying through generation

unit
Entrepreneurs renting out battery units
Solar Lanterns (own/rental)
RE Mini grids (solar, biomass, hybrid etc)
Self owned battery units
Self owned gas cylinders
Candles
Illegal use of grid supply!

Characteristics of Business Based

Market
Users are charged a fixed amount for each
connection
ti on d
daily
il basis
b i
Questionable Legality (no rural areas)
No payment receipts
No payment delays

11/22/2013

Drivers for Demand for SPV based lighting

in Developing Countries
Demand for
Lighting
Demand for
SPV

Limited
Access

Demand for
Clean Energy
Demand for SPV is driven (more) by lack of access to electricity than a
desire for clean energy. Limited access means

Legislative Framework
Electricity Act 2003
Rural
R l Electrification
El t ifi ti Policy
P li
Provision of access to electricity to all
households by year 2009.
Quality and reliable power supply at
reasonable rates.
Minimum lifeline consumption of 1 unit per
household per day as a merit good by year
2012
2013

11/22/2013

Definition of Village Electrification

Before October 1997
if electricity is being used within its revenue area for any purpose
whatsoever.
h
After October 1997
if the electricity is used in the inhabited locality, within the revenue
boundary of the village for any purpose whatsoever.
MoP February 2004
1) Basic infrastructure such as Distribution Transformer and
Distribution lines are provided in the inhabited locality as well as
the Dalit Basti hamlet where it exists.
2) Electricity is provided to public places like Schools, Panchayat
Office, Health Centers, Dispensaries, Community centers etc.
3) The number of households electrified should be at least 10% of
the total number of households in the village.

RGGVY
RGGVY provides for Decentralized Distributed
G
Generation
ti (DDG) Systems
S t
based
b d on
conventional & non conventional energy
sources where grid supply is not feasible or
cost effective.

11/22/2013

Informal Markets for Electricity

Limited access to Grid power and continued Power
Shortages.
Milli
Millions
off h
hawkers
k iin urban,
b semii urban
b and
d rurall
areas with no grid access.
Traditional sources of illumination candles, kerosene
wick lamps, lanterns.
Open circuit battery incandescent bulbs/CFL and or
LPG based
b d mantle
tl light.
li ht
Informal Markets: Mini grids supported by Diesel
Generators (DG) and battery lamps with compact
fluorescent lamps (CFL) on rent.

Note: As per a report on Informal Sector in India (1999 2000), there were an estimated over 9.32 million
enterprises outside household premises without fixed location (NSSO, 2001).

Rental Business of
CFL Battery Lamps

Use of CFL Battery Lamps, LPG Mantle Lamp

11/22/2013

5KVA Diesel Generating

Set Powering Mini grids

Mini grids power by DG set

Table: Sources of Illumination for

Hawkers: General Characteristics
Lamp
Wattage

Energy
Source

Hours of
Use

Owned CFL Battery Lamp

Grid

Case 2

Rented CFL Battery Lamp Rawatpur

Grid

Case 3

DG Based Mini-grid Nankari

60-100

Diesel

60-100

Diesel

C
Case
No.
N

D
Description
i ti

Case 1

Case 4

DG Based Mini-grid Kalyanpur

Case 5a

Temporary Grid Supply Unmetered

100

Grid

As reqd.

C
Case
5b

T
Temporary
Grid
G id S
Supply
l Metered
M t d

100

G id
Grid

A reqd.
As
d

Case 6

LPG Mantle Lamp

---

LPG

Case 7

Solar Lantern 10W/ 7W (Self-financed)

Solar

Case 8

Solar Lantern - 10W/ 7W (Financed)

Solar

Source: Singh, Anoop, Informal Markets for Electricity: Economics of lighting for
Hawkers in India, Intl. Journal of Energy Sector Management, 2009.

11/22/2013

Making Choice Initial cost Vs Daily Cost

Initial Cost vs User cost per day
Case 4
Case 5
Popular

18

Da
aily User Cost (Rs.)

16
14
12

Case 2, 3

10

Economical

Case 6

Case 1

6
4

C
Case
8
Case 7

2
0
0

1000

2000

3000

4000

Initial Capital Cost (Rs.)

5000

CO2 Emissions Vs User Costs per day

CO2 Emissions vs User cost per day

2.5

User Cost (Rs. per 100

lumen
ns for 4 hours use)

C
Case
2
2.0

Case 4

1.5

Case 5
Case 1 Case 3

1.0

Case 6

Case 8
0.5

Case 7

Green Options

0.0
0

20

40

60

80

CO2 Emissions (gms per 100 lumens for 4 hours use)

100

11/22/2013

Solar PV Based Business Model

Objective: Greening the Informal Market
Interventions by replacing use of Diesel in DG
based mini grid and grid based electricity
charging
Project: PV based direct Access and stored
electricity access
Business
B i
Model:
M d l Profit
P fit Oriented
O i t d scalable
l bl and
d
replicable business model based on user
charges.

Schematic Layout of Kalyanpur

Vegetable Market Project

F
B
C
D
36 x 12m
36m
12

Notes: A Rooftop for Phase I; B E Rooftop for potential extensions in Phase II; F G Hawkers area for mini grid

11/22/2013

Project Description
Location: Kalyanpur on NH 2, Near IIT Kanpur
Technology: c Silicon / mc Silicon based fixed panel Photo voltaic
modules with duel mode operation and limited storage capacity
Size: Phase I 5 kW PV Panels at A, Phase II 5 KW at B/C/D/E
Storage: Phase I 3 kW battery
Monthly Av. Solar Radiation: 4.8 6.3 (kWh/m2/day) Equator
Pointed 260 Tilted Surface

Potential Investors: Existingg Mini ggrid operator,

p
, VCs,, External
Financing, Banks/Financial Institutions
Revenue model: Daily user charge from mini grid connected
users (evening), day users, battery charging for CFL/LED lamps
(individual and rental business)
Total Scalable Size (multi site, one city): 50 100 kW in 3 5 years

Financing
Corporate Structure: Limited Liability
P t
Partnership
hi (Proposed)
(P
d)
Equity: 30 % (Promoters, VC)
Debt: 40 60 % (Banks/ Financial Institutions,
Carbon Funds etc.)
Grant:
Grant 20 30 % (Local/Central Govt.,
Govt
International/Bilateral Agencies (higher for
initial projects). Low or none for later projects.

10

11/22/2013

Small Scale CDM /

Programatic CDM

Rights over rooftop use

Shop owners (Phase II)

Consumers Mini
grid Connected
Hawkers

Financing (Loan/Grant)
Banks/FIs, Carbon Funds,
Banks/FIs
Funds
External Institutions

Equipment Supplier
(incl. LTM)
PV Based Hawker
Lighting Project
(Kalyanpur)

Charging Station for

Individual and
Lamp Rental
Business

Institutional
Consumers
Nearby School (Day
Users)

O & M Existing DG
Operator / New entity /
Equipment Supplier

Consumers
Permanent Shops
(Day & Night Users)

Op
peration &
Maaintenance

Financing (Grant)
MNRE & MLA/BA

Revenue
Model

Financing (Equity) Existing

DG operator / Investors

ncing
Finan

Structure of the Proposed

Business Model

Business Model: Key Drivers

Participation of Existing Operators in the Informal
Market
Replicable Project Design and Project Report
Modularity of the Project
Cluster Approach (Identified similar potential project
locations nearby)
Scale in O & M for investors setting up multiple projects
Economies in maintenance contracting to vendors
Peer Learning from Nearby Projects
Access to Trained Manpower for setting up projects and
O&M

11

11/22/2013

Implementation Strategy

Award!
PV
PV Based Replicable Business Models for Informal Markets
for Electricity received the Best Business Model Award at the
Asia Clean Energy Forum 2010 organised at the Asian
Development Bank (ADB), Manila in June 2010.

12

11/22/2013

Market for Off grid Solar

Proportion (per 1000) of households

with electricity for domestic use

NSS Report No. 535: Housing Condition and Amenities in India: July, 2008
June, 2009

13

11/22/2013

Proportion (per 1000) of households with

electricity over NSSO rounds

49th round (January June 1993)

58th round (JulyDecember 2002)
65th round (July 2008 June 2009)

Electricity Access to Weaker Sections

of the Society (Census 2011)
Total
Rural
Urban

98095
66454
31641

270129
196836
73293

Total
Rural
Urban

T t l
Total
Rural
Urban
Total
Rural
Urban

14

11/22/2013

State/UT
(1)
Jammu & Kashmir
Himachal Pradesh
Punjab
Chandigarh
Uttaranchal
Haryana
Delhi
Rajasthan
Uttar Pradesh
Bih
Bihar
Sikkim
Arunachal Pradesh
Nagaland
Manipur
Mizoram
Tripura

community TV
centre
(2)
21
24
174
139
162
1
1
1
52
2
559
124
8
20

Meghalaya
Assam
West Bengal
Jharkhand
Orissa
Chhattisgarh
Madhya
y Pradesh
Gujarat
Daman & Diu
Dadra & N. Haveli
Maharashtra
Andhra Pradesh
Karnataka
Goa
Lakshadweep
Kerala
Tamil Nadu
Pondicherry
A & N Islands
all-India

15
17
86
1
10
31
45
179
798
379
98
80
87
28
686
416
823
192
19
65

cable TV
connection
(3)
121
121
253
1000
80
230
1000
58
21
21
356
20
298
77
43
119
22
34
145
18
70
122
131
324
1000
116
187
641
529
778
1000
853
770
408
325
164

cooperative society

self-help group

(4)
240
387
507
698
135
627
301
209
128
531
86
613
316
314
365

(5)
49
211
78
424
25
233
233
124
207
54
192
233
233
192
180
302

97
197
385
46
79
399
350
481
1000
291
573
424
425
652
1000
859
538
266
287
302

231
177
232
48
106
276
267
134
690
116
431
740
357
250
800
697
386
240

15

11/22/2013

Sustainability of Business Models

Technological Sustainability
Operational Sustainability
Financial Sustainability
Environmental Sustainability

Challenge to off grid electcity access

business models
Difference between Generation Profile and
L dP
Load
Profile
fil Hence
H
Storage
St
B tt
Battery
Scalability to serve growing need of existing
consumers (mini grids)
Environmental issue battery disposal
Growth in income,
income aspirations and,
and hence,
hence
electrical load.
Competition from free/cheap grid power!

16

11/22/2013

Thank You
www.iitk.ac.in/ime/anoops
anoops@iitk.ac.in

Selected Readings

Economics, Regulation and Implementation Strategy for Renewable Energy

Certificates in India, India Infrastructure Report 2010, OUP.
A
A Policy for Improving Efficiency of Agriculture Pump sets in India: Drivers,
Barriers and Indicators, Climate Strategies, UK, Working Paper 2009
Climate Co benefit Policies for the Indian Energy Sector: Domestic Drivers and
North South Cooperation, Climate Policy 9 (5) 529 543 2009
Informal Markets for Electricity: Economics of lighting for Hawkers in India,
International Journal of Energy Sector Management: Special Issue on India, 3(3),
308 323, 2009.
A Market for Renewable Energy Credits in the Indian Power Sector, Renewable
and Sustainable Energy Review journal, Elsevier, 13 (2009) 643652.
Nationally Tradable Renewable Energy Credits for Renewable Portfolio Obligation
i the
in
h Indian
di Power SSector,
SSEE Conference
f
Proceedings,
di
Bangkok.,
k k 2
21 23
Nov.2006.
Rural Electrification in India: Economic and Institutional aspects of Renewables,
with James Cust and Karsten Neuhoff, EPRG WP 0730, University of Cambridge,
UK., 2007

17

11/22/2013

Courses, Workshops and Conferences

Short Term Course Challenges and Implementation Issues post
El t i it Act
Electricity
A t 2003:
2003 Regulatory,
R l t
P li & Technical
Policy
T h i l Solutions,
S l ti 10
14 April, 2004
International Conference on Power Market Development in India:
Reflections from International Experience, 19 21 April, 2005
National Workshop on Project Financing for Energy and
Infrastructure Sector, April 19 22, 2007
2nd National Workshop on Project
Project Financing for Energy and
Infrastructure Sector, April 24 27, 2008
Capacity Building Programme for Officers of Electricity Regulatory
Commissions, 30th June 5th July, 2008

Courses, Workshops and Conferences

(contd.)
2nd Capacity Building Programme for Officers of Electricity
Regulatory Commissions, 3 8 August, 2009
3rd Capacity Building Programme for Officers of Electricity
Regulatory Commissions, 23 28 August, 2010
Energy Conclave 2010, 8 15 Jan. 2010
4th Capacity Building Programme for Officers of Electricity
Regulatory Commissions, 18 23 July, 2011
5th Capacity Building Programme for Officers of Electricity
Regulatory Commissions, 18 23 Oct., 2012
Ppts and selected papers are available on
www.iitk.ac.in/ime/anoops

18