The role of the national framework conditions

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Within the overall solar PV sector in India, it is possible to imagine sub-sectors for off-grid and grid-connected use of solar PV technology. Grid-connected use is emerging in India, and is a different kind of socio-technical configuration with different challenges and opportunities than off-grid use. The first policy for grid-connected solar power in India was introduced in January 2008 (Shrimali and Rohra 2012). Within off-grid use, there are also sub-categories with distinctly different characteristics, including household level and village-level systems as explained in Chapter 1. The activities on solar PV are also closely related to those on other renewable energy technologies, as part of a joint renewable energy sector, often supported by similar policies, and meeting some of the same barriers for becoming widely used.

5.1.1. Challenges of rural electrification in India

The task of providing electricity to all in India remains huge, despite long-standing efforts on electrification by the Government of India (Bhattacharyya and Srivastava 2009, Palit and Chaurey 2011). The number of people who did not have access to electricity in India in 2011 was approximately 306 million (World Bank and IEA 2013). Many of these people resided in isolated communities such as islands, including the Sunderban Islands, forest fringes and hilly settlements, but a substantial portion were also found in already electrified areas (Palit and Chaurey 2011).

Electricity utilities as well as private sector electricity providers have been reluctant to provide grid extension in rural areas despite various policy plans and programs because it is costly, gives low revenue and high losses of electricity (Bhattacharyya 2007, Nouni et al. 2009, Joseph 2010).¹⁹ However, grid extension has reached an increasing number of villages, up to more than 90% of the 570,000 villages in India (Palit and Chaurey 2011). Despite this achievement, the actual number of households connected continues to be low. The definition of an electrified village is that basic infrastructure such as distribution transformer and distribution lines are provided in the inhabited locality as well as the hamlet where it exists, the electricity supply covers public places like schools or health centres, and covers at least 10%

of the households (Palit and Chaurey 2011).²⁰ Therefore, there is a large difference between percentage of villages electrified and portion of households connected. Reasons for non-connection by households include their financial constraints, the perception that the quantity and quality of the electricity services will be inadequate, and poor reliability of the electricity supply (Palit and Chaurey 2011).

19 Small rural customers impose especially high costs of supply as they are demanding electricity especially during peak hours at a low voltage level (Bhattacharyya 2007). This is because losses of electricity during distribution are high where the power lines are long and the voltage level low.

20 The definition was changed in 2004 and reduced the electrification achievements for India because the previous definition only required that the grid reached any point within the revenue boundary of a village (Palit and Chaurey 2011).

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5.1.2. Government programs and incentives for use of solar PV for power provision

An important factor that made the Sunderban projects possible was the funding support achieved from the central government of India. Already from the outset in 1996, the national framework conditions for use of solar PV technology and other renewable energy technologies in India had an impact on the room for maneuver for the project implementers.

The potential of renewable energy was early acknowledged by the national government of India and led to the creation of a special Ministry for New and Renewable Energy Sources (MNRE) in 1992.²¹ The Ministry’s initiatives and allocation of funds for various renewable energy programs facilitated the activities in West Bengal and other states, through state level agencies (like WBREDA) which implement policies and programs for the Ministry. The Ministry thereby helped establish system innovation within the use of solar PV technology as well as other renewable energy technologies in India.

The Ministry is still small compared to the Ministry of Power and the Ministry of Petroleum and Natural Gas, which represent the dominating and prioritized energy regime in India. These and other strong and established institutions, maintain and strengthen the conventional strategies for power provision. These are not creating direct hindrances to the off-grid, renewable energy activities, and the latter have also started to become part of the electrification programs of Ministry of Power, through a program called the Decentralized, Distributed Generation program (DDG). However, there is little doubt that conventional, large scale centralized solutions are seen as far more important than the small-scale, decentralized solutions using solar PV or other renewable energy technology. For instance, the interviewed person responsible for decentralized, renewable power provision under Ministry of Power did not see decentralized power provision as important for the huge task of electrifying the remaining un-electrified areas in India.

The work on solar power provision in India started several decades ago. According to government statistics, there are more than 700,000 solar home systems and more than 800,000 solar lanterns in India (around 40 MW installed capacity), in addition to the village level systems (solar mini-grids and solar charging stations, 96 MW installed capacity) (Palit 2013). The statistics do not show how many of these systems are actually working, but according to informants, problems of maintenance and battery replacement have been common.

The support for off-grid solar power supply has been given through various policies and programs. During the early years, the government policy mainly emphasized subsidies and government tenders for purchase of technical equipment. From the 1990s there were also initiatives to facilitate market based diffusion, through micro-financing. A financing agency, Indian Renewable Energy Development Agency (IREDA), was established by the government to administer financing of activities in the solar PV field and other renewable energy through loans with low interest rates. The focus was on solar systems for individual

21 Worldwide this was the first ministry of its kind. The name was earlier the Ministry of Non-conventional Energy Sources (MNES) (up to 2006), and it built on the Department of Non-Conventional Energy Sources (DNES) started in 1982.

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buildings, and WBREDA developed its solar mini-grid model as an alternative to these, but achieved financing from the same sources. The MNRE official interviewed expressed ownership of the projects.

The basis for the recent policies and programs for electrification, including decentralized solutions, is the Electricity Act from 2003. This states that all areas in India shall be electrified, but that some of the areas are not likely to be reached by normal, rural electrification. This is because they are either remote, in difficult terrain or very sparsely populated. These areas shall at least be provided with basic lighting facilities. The Remote Village Electrification (RVE) program initiated by MNRE (in 2001) works for provision of basic lighting systems to all households of such villages (Moharil and Kulkarni 2009). By 2011, the RVE program covered 1.5% of the electrified villages in the country (Palit and Chaurey 2011). Some of the solar mini-grids in the Sunderban Islands were funded from this program.

The Javaharlal Nehru National Solar Mission of the MNRE has increased the activities of the MNRE and the flow of resources into RVE, according to solar PV-experts interviewed in New Dehli. The Solar Mission aims to set up an enabling environment for solar technology by creating policy frameworks, increase the capacity of grid-connected solar power generation, establish favorable conditions for solar manufacturing capability and promote programs for off grid application.²² Among its targets has been to promote off-grid systems to people “without access to commercial energy”, including 20 million solar lighting systems, under the RVE program. The promotion of solar lighting systems is only a small part of the Solar Mission, which mainly promotes grid connected solar power supply through policy instruments such as feed-in tariffs, viability gap funding and renewable energy certificates (Shrimali and Rohra 2012).

Rural electrification is the domain of Ministry of Power, and since 2005 the Rajiv Gandhi Grameen Vidyutikaran Yojana (RGGVY) has been the overall program for this.

Since then, both grid extension and decentralized, off-grid electricity generation has been included, but the latter is nevertheless a new and small activity for this ministry, seen as intermediate solutions until the grid is extended to these places. After the Ministry of Power got the responsibility for some of the decentralized off-grid electricity generation, there was a fight between the ministries on who should implement off-grid projects, and the MNRE was being marginalized according to solar energy experts in New Dehli. This situation possibly had an impact on how the Sunderban projects were viewed at the time of the fieldwork, both by the implementers, energy consultants and policy makers. They did not seem to judge WBREDA’s Sunderban model as a model for the future.

The power sector reform in India in the 1990s had led to increased focus on profitable activities and drive for commercial solutions for electrification. Such ideals were strongly expressed by the informant in Ministry of Power, emphasizing the commercial thinking in this Ministry. The Electricity Act of 2003 had dissolved the vertically integrated utilities and separated the generation, transmission and distribution of electricity as separate businesses operated by large companies, of which the majority is still state owned (Bhattacharyya 2010). Some of them are owned by the Ministry itself. The distribution

22 Resolution no. 5/14/2008-P&C

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utilities are state owned, and a typical problem for these is debt due to unrealistic tariffs and subsidized agricultural connections (Nouni et al. 2009, Bhattacharyya 2010, Joseph 2010).

The opening up for non-state actors is also present in the DDG program of Ministry of Power. There are provisions for license free generation and distribution of electricity from stand-alone and off-grid systems in rural areas and management of rural distribution by local governmental bodies, cooperative societies, non-governmental organizations, franchisees and others (Dubash 2007). Tariffs for such systems are not regulated. It was hoped by the Ministry official and solar experts interviewed that the program could involve the private sector through franchisee models for off-grid areas through competitive bidding with 90%

capital subsidy and a small operational subsidy. An informant in Ministry of Power criticized the Sunderban solar mini-grids for not being commercially profitable and thereby not replicable by private sector actors, and he criticized the provision of grants to off-grid power plants in West Bengal through MNRE financing.

This section has identified some of the context that facilitated and influenced efforts to develop new models for solar power supply in India, including the shortcomings of the conventional electricity regime and relevant elements of the socio-technical system (or niche) for solar PV in India. WBREDA’s solar mini-grids in the Sunderban Islands emerged from these broader framework conditions in India.