The potential of mini-grids as a sustainable and economical alternative for global electrification

Jharkhand is soliciting bids for maintaining mini and microgrids – decentralised, small-scale electricity generation systems – across the state. Previously, the state has had disappointments with unreliable vendors meant to maintain such systems which are key to the state where more than 350,000 households do not have electricity.

Since July, the state, where 5.7% of the population still reside in households without electricity, has initiated tenders for Comprehensive Maintenance Contract and Operation (CMC) covering 212 mini/microgrids in seven districts.

This comes at a time when India, during its G20 presidency, is discussing mini-grids as a solution to tackle energy poverty.

Over the past five years, some contractors have not submitted annual CMC reports, leading to concerns about the functionality of the existing mini and microgrids, Dheeraj Kumar Gupta, Senior Programme Associate at WRI India, told Mongabay-India.

Talking about Jharkhand’s current bids for maintainance contractors, Gupta emphasises that it is important for the Jharkhand Renewable Energy Development Agency (JREDA) to set up a monitoring system for contractors and to impose penalties if needed. “Failure to do so could jeopardise the overarching goal of the planned mini-grid initiative,” he added.

The uncertainties of mini-grid solutions are not limited to Jharkhand. India has installed about 4,000 solar mini grids, of which 3,300 are owned or financed by the government, according to a media article which gathered information from Smart Power India, an organisation working to end energy poverty. Out of 3,300, only 5% are operational, said the media article that accessed this data. In another claim, Smart Power states that the country has deployed 14,000 mini and microgrids as of 2019.

What is a mini-grid?

A mini-grid is a decentralised electricity generation system with capacities exceeding 10 kW. It caters to various needs such as homes, businesses, institutions and small industries. Micro-grids are smaller systems with capacities below 10 kW. They operate independent of the electricity grid.

Gupta categorises mini-grids into three ownership types: public, private, and philanthropy-backed. In his experience, he finds public sector mini-grids face significant maintenance hurdles due to lack of monitoring mechanism, whereas privately-owned solutions grapple with higher costs. On the other hand, the philanthropy-supported model involves a modest fee and can provide accessible electricity to communities, but is dependent on continued philanthropic support.

A solution to energy poverty

According to a World Bank report from 2022, the global electrification rate reached 91% in 2020, significantly reducing the number of people without electricity access to around 733 million — compared to approximately 1 billion people in 2016 and 1.2 billion in 2010.

Between 2010 and 2018, an average of 130 million people, globally, gained access to electricity annually. During this period, India connected nearly all villages to its grid through targeted interventions. By 2019, India declared 99% household electrification after which it moved from the third to the seventeenth position on the list of countries with the highest access deficits.

However, recent years have seen a slowdown in the pace of electrification, globally, raising concerns about the global aspiration to achieve affordable, reliable, sustainable and modern energy for all by 2030, as per the Sustainable Development Goals (SDG 7). Director General of International Solar Alliance, Ajay Mathur says, “Globally, we are not on track to achieve the energy-related SDG (SDG7) by 2030.”

As per current estimates, about 650 million people (9% of the global population) would be left without access to electricity by 2030. This inaccessibility is particularly acute in sub-Saharan Africa and in rural areas in almost all developing countries, says Mathur.

As the pace of grid infrastructure development decelerates, many experts and international organisations are turning to mini-grids as a potential solution.

International Solar Alliance (ISA) is a partner organisation to India’s G20 Presidency for 2023 and, as part of its deliberation on energy transition, published a report on July 20 this year which says that around 59% of the unelectrified population can be best suited for electrification through solar-powered mini-grids.

Debajit Palit, a professor of energy at NTPC School of Business, told Mongabay-India that in numerous African countries, extending transmission lines to remote regions incurs significant expenses. Opting for local generation through mini-grids close to the demand proves far more cost-effective than extending transmission lines.

He said that the mini-grid concept could offer a superior solution for India too, where decentralisation is gaining traction driven by the need for decarbonisation and further fuelled by the adoption of digital technologies. This shift makes mini-grids, espeically inter-connected with grids, a viable choice, not only for rural areas but, potentially, even more advantageous for urban set-ups.

India currently leads the list of countries with planned mini-grids – those that developers, governments and other organisations have said they plan to build over the next several years. India’s plans to install 18,900 mini-grids, followed by Nigeria (2,700), Tanzania (1,500), Senegal (1,200) and Ethiopia (600).

However, to meet SDG 7, the world will have to power 490 million people through the construction of more than 217,000 mini-grids. At the current pace, only 44,800 new mini-grids serving 80 million people will be built by 2030, says the World Bank report.

Policy support 

Private sector mini-grids are facing challenges. A paper published in Energy Research and Social Science underlines the conflict between customer affordability and business viability of private mini-grids. Lead author and energy expert Venkata Bandi identifies grid expansion, policy gaps for off-grid, consumer reluctance to pay, and entrepreneurial apathy as the main challenges. “Capital costs are often sunk costs,” he says while responding Mongabay India’s queries.

Government mini-grids too are performing poorly, with a majority of them not functioning, as reported in a recent media article, based on inputs it received from Smart Power India.

Additionally, India’s electricity sector has some unique regulatory challenges with regards to mini-grids, according to Debajit Palit. Under the Electricity Act of 2003 and the Rural Electrification Policy of 2006, standalone renewable energy systems, including mini-grids, were intentionally kept separate from the regulatory framework to foster competition among private players and maintain controlled pricing. While well-intentioned, the policymakers overlooked the vastly distinct infrastructure demands and investment pre-requisites of mini-grids and individual solar home systems, inadvertently treating them alike.

Due to significant infrastructure investment demands, mini-grid tariffs often exceeded government-subsidised rates. Thus, it is currently only considered as a stop-gap solution until main grid access becomes available. Palit adds that excluding mini-grids from regulatory benefits, such as cross-subsidies applicable to grid connections, further hindered their expansion.

In the last three decades, several mini-grids have been established in the country, but only a few have survived. Ajay Mathur attributes the decline of some initial solar systems to their obsolescence resulting from the vigorous rural electrification initiative, Saubhagya, which accomplished nearly universal electrification in rural India by 2019.

For the successful implementation of mini-grids, Mathur says that cutting-edge and technologically advanced solutions facilitate effortless system operation, monitoring and upkeep. In addition, community engagement is crucial to ensure system planning which also creates job opportunities, he said.

Mathur points out that the success of mini-grid businesses in Bihar and Uttar Pradesh is due to policy tweaking.

In 2016, the Indian government introduced a Draft National Policy on Mini and Micro-grids, aiming to establish a minimum of 10,000 micro/mini-grids powered by renewable energy sources. However, the government’s focus shifted to large-scale projects and it was put on the back burner, says an expert requesting anonymity.

Community involvement vital for success

Despite the challenges, experts say that the mini-grid has merit in meeting India’s energy demand and global commitment to using clean fuel. Compared to big projects, mini-grids have less ecological impact and provide reliable and quality power.

For success, local community engagement at all stages is vital, emphasises Anshuman Lath, Director of Gram Oorja Solutions Pvt. Ltd., an organisation operating 104 mini-grid solar solutions across Jharkhand, Maharashtra, and Karnataka. Lath told Mongabay-India that success hinges on the local community recognising the initiative’s importance.

A 2022 discussion organised by WRI India and the Transform Rural India Foundation highlighted the role of formalised community institutions like self-help groups, farmer-producer organisations, and Panchayati Raj institutions in ensuring comprehensive village infrastructure planning. In cases lacking formal structures, robust community bodies such as village energy committees (VECs) can be instituted to oversee mini-grid management, from planning, installation, tariff determination, and fee collection to maintenance.

Lanvin Concessao, Senior Program Associate, WRI India, said the importance of mapping electricity access areas and development indicators across energy-poor regions of states, especially where grid-connected power is unreliable or not available. He suggested establishing coordination mechanisms between mini-grid developers and electricity distribution companies to understand future grid extension plans, create a conducive regulatory environment for integration of main grid and mini-grids, support in tariff-setting and promote mini-grids in unserved areas.

Banner image: Mini-grids are being regarded as a solution for energy poverty, especially at a time when grid connectivity is decelerating. Photo by Ayush Manik/Flickr.