Microgrids: Why some fail, and how they can succeed in providing electricity to rural India

Governments, entrepreneurs, and residents face many challenges in the quest to bring electricity to remote areas of the developing world.

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By Reja Amatya | Research Scientist, MIT Energy Intiative and Tata Center

A village within three hours drive from Lucknow, the capital city of Uttar Pradesh (UP), received its first electrical line in January 2012. This was through Mera Gao Power’s microgrid, which provided service of four hours lighting and cell phone charging in the evening from 6pm-10pm.

This village in Reusa district was one of more than 400 villages around UP that Mera Gao was serving through their microgrid business. These villages are 10-15 minutes by motorcycle from town centers, which do have state grid connections. In many of the villages, there are even poles and electrical lines for grid services, but no electricity.

This is the situation in more than 10,000 villages across UP and Bihar – two of the poorest and least electrified states in India. Our MIT team visited new potential sites where Mera Gao was planning to build microgrids. People were enthusiastic and even said they were willing to pay more than what was being charged for other Mera Gao customers, which is $2 per month.

Along with the excitement of getting electricity for the first time, we also heard a few other things – at least 40% of the community would have to buy in to justify installation of a solar microgrid. That means in a village of 100 homes, at least 40 homes had to sign up saying they would pay for the service, otherwise the number was too small to justify putting in a central solar microgrid business. We also heard people asking if they could have more power than just light and cell phone charging. How about television? Would there be enough power to run an agricultural pump?

And there was another issue that Mera Gao was avoiding – interaction with government. Having a regional office in one of the town centers, people knew Mera Gao as the electricity provider. We heard from shop owners who wanted Mera Gao’s service, because it was more reliable than the state grid, which provided limited service. When their were failures in the grid, like a transformer explosion, it could take months for someone from the state utility to come and fix it. Mera Gao did not provide service for the people in town at the time (2012), because they did not want to interact with the grid; they wanted a stand-alone system that they could operate on their own.

There is one benefit to that philosophy since India currently does not have any regulation for electricity provision for rural communities in small scale – there is no bureaucracy and things could move at a much faster pace than having to involve government officials. But a big drawback of not including government into your plan, especially in a country like India, is what Greenpeace saw happen in Bihar, where they set up a microgrid and within a few months much cheaper state grid came in to supply electricity, making Greenpeace’s microgrid irrelevant.

There are two distinct sets of problems that we saw in this one visit. One, for a bottom-up approach to electricity access, a lot of community buy-in is needed to set up a microgrid. Apart from expensive solar home systems and solar lanterns, there are no other solutions that can provide electricity on an individual scale. Within this bottom-up approach, there is also the issue of how technology addresses demand growth within a community. Currently, most off-grid solutions (microgrids) come with fixed generation assets and distribution network where you can probably add another battery and panel to support demand growth, but not for one and two individuals.

The second problem is with the interaction, or lack of, with government and utilities. In India’s context particularly, there are lots of organizations and government entities that do want to provide access, either through grid extension or an off-grid solution. But there is a lack of cohesive planning. If an independent microgrid operator does not know where the grid extension is happening, how can they plan to have a successful business?

People in India still consider grid the optimal solution to getting electricity, and with huge subsidies, it is very cheap (4-6 cents/kWh). How can any alternative solution compete in this distorted market? Within the Tata Center at MIT, faculty and researchers have been looking to tackle these issues.

An innovative new approach for electricity distribution is being considered, with an ad-hoc microgrid that can support multiple loads, and focuses on generation and demand management with state-of-the art control algorithms that will make the operation of the network autonomous. Modular architecture can help with scaling the system with demand growth. With embedded billing and payment capabilities, the system can be a lot cheaper than a solar home system but more flexible than the current version of a central microgrid system.

Another project in development is a comprehensive planning tool kit that would enable a common platform for electricity planning across a large-scale geographic region, i.e. district, state or national levels. Such a tool would allow planners to make an effective decision based on least-cost optimization to choose an appropriate solution between grid extension or off-grid solution for a particular area.

Private entrepreneurs or distribution companies could evaluate the economic benefits of different electrification solutions based on tariff or subsidy structure in a country. Combining this top-down and bottom-up approach is also a research focus for a team at MIT that looks at grid-compatibility of microgrids, and how large number of microgrids could be interconnected and/or connected with the national grid. Since the IEA said in their 2010 World Energy Outlook that 42% of the off-grid electricity demand will be met with microgrids, the Tata Center is looking at precise questions of what those microgrids could look like, how they could fit into the national electricity planning scheme.

This story originally appeared in Vol. 3 of the Tata Center Community Journal. Access full issues here.