Micro and Mini Grids Could be the Answer to Grid Stability and Reliable Power in India

With government-run programs accelerating electricity demand in India, mini grids and microgrids could be a game-changer

January 28, 2019


The demand for electricity in India is expected to continue its rise along with economic growth. Government-run electrification programs like the Pradhan Mantri Sahaj Bijli Har Ghar Yojana (SAUBHAGYA) to electrify all willing households in the country  (24*7 Power to All), Deen Dayal Upadhyay Gram Jyoti Yojana (DDUGJY), and Unnat Jyoti by Affordable LEDs for All (UJALA), could further fuel an increase in electricity demand with an increasing number of households getting connected to the grid. But India’s grid infrastructure is not keeping pace with power generation additions, making microgrid and mini grids an important piece of the energy puzzle, especially in rural areas and regions where the grid has not reached the population.

Looking at the timeline of the green energy corridor and modernization of the national grid, it is likely that the process may take several years and a considerable investment for the grid to provide uninterrupted power supply to rural areas. In March 2018, Mercom reported that “The Standing Committee on Energy has said more funding is needed if India is going to install enough physical transmission infrastructure to meet its ambitious timeline to create a Green Energy Corridor.”

According to the U.S. Department of Energy, “a microgrid is a group of interconnected loads and distributed energy resources within clearly defined electrical boundaries that acts as a single controllable entity with respect to the grid. A microgrid can connect and disconnect from the grid to enable it to operate in both grid-connected or island-mode.”

A minigrid is defined by the Ministry of New and Renewable Energy (MNRE) as, “A minigrid is a system having a renewable energy-based electricity generator (with capacity of 10kW and above), supplying electricity to a target set of consumers (residents for household usage, commercial, productive, industrial and institutional setups) through a public distribution network (PDN).”

The MNRE realizes the importance of the role renewable energy-based mini and microgrids are going to play in India and the Ministry aims to set up a minimum of 10,000 renewable energy-based micro and minigrids across India with an estimated capacity of 500 MW.

Discussing the costs to set up a microgrid, K.N. Sreevatsa, the head of power conversion and electric vehicle infrastructure at ABB India, said, “Microgrids are the future as they enable the highest efficiency of usage and also facilitate grid stability for the optimum operation of the grid. Depending on the type of microgrid, the cost of set up can vary from different sources to the power electronics that combine and define them. The cost is dependent on the specifications of the requirements. But the primary difference is that electricity can be received even without the electrical grid (power cuts).”

Mini and microgrids can create a win-win situation for the consumers, the government and for the renewable energy industry, which can tap into this large market.

Discussing the current energy dynamics in the country, Ram Vaidyanathan, the CEO of WiSH Energy, told Mercom, “At a very conservative cost of ₹40-50 million (~$0.57-0.7 million)/MW, we are looking at an immediate market potential of at least ₹3,000 billion (~$42.93 billion) for renewable energy-based mini and microgrids. On their own, solar mini and microgrids may or may not be viable. However, the use of any abundantly available local resource such as biomass, wind, or hydro along with solar to create a hybrid system can make the overall system more viable. This will reduce the total cost of ownership, transportation, carbon footprint and thereby ensure long term sustainability.”

In India, household electrification under the SAUBHAGYA program is underway. According to government estimates, a total of 212,925,998 households have been electrified in India to date.

“The cost of a microgrid depends on the size and complexity of the system being proposed. It can be as little as ₹65,000 (~$928.5) per kW for a simple, grid-connected system. However, in the event that more storage or additional controls are added, the costs can go up significantly. However, by using the right mix of renewable sources to optimize the total generation and the fact that renewable energy has almost zero operational or “input” costs, a microgrid can offer payback periods as low as 2-3 years taken over a 20-year life,” added Vaidyanathan.

Discussing the cost comparison of bringing the electric grid to rural areas, Sreevatsa said, “Compared to costs of constructing transmission lines and substations, the cost of a microgrid in remote locations is miniscule. With integrated, utility-in-a-box type of solution, the protection required for these systems is also available along with advanced, real-time remote monitoring and control for smart grid and smart village requirements.”

India is geographically diverse and bringing the national grid to far-flung areas will be an expensive proposition, not to mention it could take years to execute.

Explaining the cost factor, Sreevatsa said that extending the distribution grid to rural areas will become expensive, especially since the population is sparse.  “It requires a minimum investment of ₹3 million (~$0.04 million) per kilometer of line. In addition, operations and maintenance costs need to be factored in. If the nearest distribution point to a rural area is, say, 5 km away, we are looking at ₹15 million (~$0.2 million) just to bring the main grid power to a single point in the village, beyond which it still must be connected to individual households,” he added.

Unless enough revenue is generated to break even, Vaidyanathan says that there is a high chance that the government may lose significant amounts of money. Besides the financial burden, the quality of power is also affected when the main grid is extended. Power losses go up with increasing distance of transmission and distribution, and power unavailability or blackouts can happen frequently. Also, from a logistic perspective, extending the main grid into remote areas poses several challenges such as the availability of large tracts of non-agricultural land over which the towers and lines can pass.

“In such a scenario, solar micro and minigrids assume greater significance as they ensure constant electricity supply utilizing renewable energy sources,” added Vaidyanathan.

Rallying for microgrids, Vaidyanathan stressed the fact that microgrids hold the key to enabling rural India with sustainable and reliable power. Islanded microgrids are a prevalent and proven model across the world. For rural India, these are ideal, as communities tend to be spread across large areas, and therefore localized systems are likely to work better. In addition, solar power mini and microgrids are easy to maintain and can be scaled up to cover a larger population. With some investment in storage capacity, these can be made more sustainable and provide power to rural India.

Mercom previously reported that advances in technology such as energy storage along with rising diesel prices, and favorable government policies have enabled an environment to support the economics of small-scale clean energy systems. The advent of new storage technologies such as pumped hydrogen will also increase the viability of microgrids significantly.

The market for microgrids is still in its nascent stage and as of January 2018, 63 solar microgrids totaling 1,899 kW had been installed in the country.

The government needs to take steps to further the case of mini and microgrids in the country, Vaidyanathan said. The right regulatory and policy ecosystem is vital for the growth of any industry and renewable energy is no different. “There are already several successful policies for the growth of large-scale renewables, and we expect the same approach to be taken for hybrids and microgrids,” added Vaidyanathan.

Sreevatsa commended on the government’s ability to help in the creation of more mini and micro grids. “Since the microgrid does not fall into a conventional system, it might help to enable a separate category for the microgrid products so that such products can help utilize 100 percent renewable energy. A separate category and structure can be based on the usable energy that the system can generate. A necessity for a microgrid category is evident as the goal is not to add more renewable energy (solar) capacity but to utilize it to make it more usable as energy consumption.”

Hybrid microgrids serve to increase the amount of generation for the same installed capacity and therefore, are more financially viable and sustainable in the long term. From a technological standpoint, the viability is already established through several existing hybrid microgrid installations, both grid-connected as well as off-grid with storage. From a commercial standpoint, the only challenge currently is the cost of energy storage, which often accounts for more than half of the overall system cost.

Vaidyanathan added the financial ecosystem for funding hybrid renewable projects and microgrids is still fairly nascent. Funding happens on a case-to-case basis, and there are not too many available options at this stage. However, we can expect this to change rapidly with the development of well-defined policies that will give confidence to financiers and investors on returns from such projects. The falling costs of renewable energy will also continue to influence greater adoption.

Renewable energy-based mini and microgrids can be extremely beneficial for India. It can help the country power its rural population as the national grid is yet to reach far-flung areas. The government needs to push this initiative forward with subsidies, cross subsidies and incentives to make reliable 24×7 power for all a reality.

Image credit: ABB