Policy and Regulatory Interventions to Support Community Level Off Grid Projects

Balawant Joshi Director, ABPS Infrastructure Advisory Pvt. Ltd. June 04, 2012

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Rural Electrification Scenario in India

Mission to bring electricity services to ALL by 2012 is on Out of 6 lakh census villages, only 14,000 are remaining However, 32.7% households are yet to be electrified Several of these households are in un electrified villages, padas, bastis. Typically these habitations have less than 100 households Even electrified villages are witnessing shortages in supply At the same time, local renewable resources are not being tapped Costs of renewable technologies is reducing with time It has become imperative to develop decentralized RE generation options

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Typical Off-grid village profile

Remote unapproachable locations
>10km distance from block quarters >5km distance from 11kVgrid Much higher in tribal central & western region

Inaccessible by pakka road No year round connectivity

Being a agriculture based country,

Rural population depends on agriculture for livelihood Absence of commercial activity Majority population comprises of household self farming Mainly single rain fed crop & some case gypsy zoom cultivation Others workers (under various rural development schemes)

Low income levels low cash liquidity

>40% BPL population Approx monthly per capita income ~Rs 300 or USD 6

Low literacy rate (~40% overall) lack of skilled manpower

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Load Pattern, Energy use & Willingness to Pay

Domestic Village Demand: 500-3750 kWh Commercial Village Demand: 30 1500 kWh
Possible load mix: Initially around 70-80% domestic. Commercial fraction increases slowly with time & development of income generation activities

Present Energy Use Pattern

Lighting: Kerosene is used by Domestic consumers.
3 9 lit/month (@avg price Rs 9/lit)

Willingness to Pay
Lighting: Equivalent to monthly Kerosene cost (30-120 Rs/month) Varies with region/area (higher with higher monetary income) Higher in some areas who are already using DG set electricity for light Rs 10-15 per kWh (equivalent to DG price)

Commercial consumers use DG sets.

Diesel costs Rs. 45/ litre

Costs incurred by currently un-electrified households is far more than costs incurred by electrified

consumers in DISCOM area;

Per kWh tariffs paid by consumers of off-grid scheme are far higher than that of DISCOM

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Key Challenges in Rural Electrification

Reliance on large share of subsidy Technology specific schemes Where grid has reached, supply is severely constrained Relies heavily on NGO, PRI, SNAs for implementation Limited, if any, role of private sector Lack of clarity on issues related to supply and collection of charges

National level schemes could not account for local resource issues
Large scale deployment & optimization of subsidy were not objectives Consequences of grid expansion are not considered Existing policies/programmes are inadequate for large scale deployment
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Issues with Legal and Policy Framework

The Electricity Act 2003 has Several provisions for promotion Rural Electrification Attempt to promote every possible model No structure to implement license exempt framework Franchisee framework has emerged over time Sometimes, different ministries pursuing different approaches As a result, weak or no implementation framework prescribed Consequently, very little private sector participation.

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Characteristics of PRI
Business model proposed in PRI must work in off-grid & grid connected set up Consumer should not pay more than
Electricity tariff in adjoining areas (not more than DISCOM tariff) Existing expenditure on lighting load

Compliant with EA 2003, existing policies Create structure for flow of subsidy As far as possible, internalization of costs of Rural Electrification Should make use of existing institutional structure Avoid conflict between programmes of two ministries Should promote private sector involvement
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Off-Grid Distributed Generation Based Distribution Franchisee

O D G B D F
Government

Subsidy, if required

DISCOM

FIT (Cash Flow) Consumer tariff

1/3

PPA and FA DPR Financial Closure Project Commissioning

Project Developer

Tariff (Cash Flow) Flow of Electricity

Consumer

Consumer

Consumer

Consumer
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Institutional & Contractual Structure

O D G B D F

GoI
CFA Model Franchisee (optional) Scheme

FOR
Model Regulations for Off-Grid Supply

CEA
Model grid connected guidelines

State Govt

SERC
Regulations for Off-Grid Supply FIT Order

Notification of rural area

2/3

RLB
Confirm unelectrified status of village / hamlet Consent Franchisee Agreement

DISCOM
PPA

ODGBDF

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Advantages of the Proposed Model

O D G B D F

Maximum certainty of revenue to the developer Proper integration of off-grid projects with grid as and when is feasible Would enable large scale deployment of off-grid projects Internalisation of costs of rural electrification DISCOM can meet meet twin objective of electrification and RPO

3/3

Possible to customise model according to local requirements

Optimum utilisation of the government subsidy, if offered

FIT guidelines at national level would bring in uniformity.

Distribution franchisee framework under RGGVY could be adopted Model could be used for off-grid as well as on-grid supply augmentation
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Email: contact@abpsinfra.com

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