Renewable Energy Microgrids Workshop:

Business Models and Structuring

Future Energies Expo 2017, Astana, Kazakhstan

Sustainable Energy Center of Excellence (SECOE)

Sagar Gubbi,
Managing Partner, Ecoforge Advisors
Bangalore, India

11th August 2017

Publishers/sources /owners of all images, data, logos and graphs in this presentation have been referenced and acknowledged;
These are used solely for the purpose of this presentation and no copyright or intellectual property infringement is intended; data
accuracy as per owners/sources; no representation by Ecoforge Advisors of any of the organizations mentioned is intended.
 Electrification in Developing Countries

• 526 million people in Developing

Asia had no access to electricity
in 2013

• 237 million in India and 289

million in developing Asia
(excluding India) had no access
to electricity in 2013

• Average electrification rate

in India is 81%; rural
electrification rate is 74%

• Average electrification rate

in Developing Asia
(including India) is 86%;
rural electrification rate is
78%

Source: IEA World Energy Outlook 2015

 Electrification in Asia

Source: NASA Night Sky Images

 Electrification in Asia

Sources: IEA World Energy Outlook 2015

 Electrification Projections 2030 and 2040 – IEA
Projections 2015 based on New Policies Scenario

• Number of people without access to electricity is estimated to decline to around 810 million
in 2030 and 550 million in 2040 (6% of the global population at that time)

• Although 1.8 billion additional people gain access to electricity by 2030 (2.7 billion people by
2040), 550 million people will remain without access to electricity in 2040; 500 million of
those will be in Sub-Saharan Africa and 50 million will be in Developing Asia
Sources: IEA World Energy Outlook 2015 – Energy Access Projections
 Energy Ladder - Alternatives to
Grid Electrification
Off-grid
Solar Home Systems
- 5-300 Wp solar panels
- Multiple lights, phone
Solar Lamps/Lanterns charging and many
- Entry-level products times, small appliances
- Single light (and - Each unit typically
sometimes phone serves one household
charging) only only
- Each unit serves
single household only
Mini-grid
Mini Grids/Isolated
Grids
- 30 kWp and above
Micro Grids solar or small wind or
- 5-15 kWp solar or biomass or micro-hydro
small wind or biomass or hybrid power plants
or micro-hydro or hybrid - Nearly the same
power plants service as main
- Typically support electricity grid
lighting and small - Can serve large
appliances only number of households
- Each micro-grid serves (>100) and some small
businesses, clinics,
several households in a
small community (<100) telecom towers etc.
Renewable Energy Micro and Mini
Grids – Business Models

Type 1 – Community Model

• Community-owned
• ESCO – construction, O&M

Type 2 – ESCO Model

• ESCO-owned
• ESCO – construction, O&M

Type 3 – Hybrid Model

• Co-owned by ESCO and Community
• Construction, O&M – managed jointly by ESCO and Community

Type 4 – Grid Utility Model

• Grid utility owned
• Grid utility – construction, O&M
Renewable Energy Micro and Mini Grids –
Strategic Decision Making

Source: EUEI-PDF, ARE, EU/RECP and REN21 mini-grid policy toolkit published in 2014
Renewable Energy Micro Grids Business Models –
Examples

• If RE Power Plant (off-grid) owned and operated by an ESCO or utility

• Sells electricity directly to telecom towers and communities
• Collects regular uniform tariffs from telecom towers and communities, and
subsidies/incentives, if available

• A formal partnership with telecom operators is important for the success of this model
Renewable Energy Micro Grids Business Models –
Examples

Power
Evacuation
to EC Grid

• RE Power Plant (decentralized) owned and operated by ESCO

• Sells electricity to national utility which in turn sells it to telecom towers and
communities
• Power Purchase Agreements signed between ESCO and utility

• A formal partnership with telecom operators and a bankable PPA between ESCO and
utility is important for the success of this model
Renewable Energy Micro Grids Business Models –
Examples

• Single RE Power Plant (off-grid) owned and operated by ESCOs or utilities

• Sells electricity directly to a single small or large mine and local communities
• Collects regular uniform tariffs from all consumers

• Micro-grid solution providers such as ABB have recently announced micro-grid technology
solution/business models for mining sector
Renewable Energy Micro Grids Business Models –
Examples

• Single RE Power Plant (off-grid) owned and operated by ESCOs or utilities

• Sells electricity directly to a cluster of small or large mines located in close proximity to
each other, and local communities
• Collects regular uniform tariffs from all consumers

• Micro-grid solution providers such as ABB have recently announced micro-grid technology
solution/business models for mining sector
Renewable Energy Micro Grids Business Models –
Examples

• Multiple small RE Power Plants (off-grid) owned and operated by ESCOs or utilities
• Sells electricity directly to telecom towers, eco-tourism resorts, rice mills and
communities
• Collects regular uniform tariffs from all consumers, and subsidies/incentives, if available
• A single ESCO operating multiple power plants in a cluster of small islands brings economies
of scale
 Renewable Energy Micro Grids –
Site Identification
A few criteria for site identification:

• Location of communities
• Far away from the grid
• Accessible

• Local demography and population size

• Large number of unenergized households

• Latent demand for electricity

• High demand for electricity from households and micro-enterprises/businesses
• Willingness to pay

• Local availability of renewable energy resources

• River or creek or wind speeds or biomass resource availability

• Existing or potential local commercial power consumers

• Rice/corn mill, ice plant, eco-tourism resorts, telecom tower etc

• Existing community development, cooperative or financing organizations

PROCELA Step-by-Step Project Development Guide for Micro-
grids in India
Service Key Activities

• Identifying and defining cluster of villages/sites

• Desk-based site selection activities that include site profiling, site
attractiveness assessment
• Field-based Detailed Energy Surveys (DES)
 Project Development (PRO) • Shortlisting of most viable villages/sites based on findings of DES
Activities • Final selection of sites/villages
• Grid mapping
• Power plant economics analyzed
• Project Feasibility Report (PFR) developed
• Detailed Project Report (DPR) developed

• Support for PRO activities as necessary

 Community Engagement (CE), • Introduction and awareness raising of program
Load Acquisition (LA) • Explanation of mini-grid terms and conditions to local communities
• Identifying and acquiring customers – both anchor load and
households – as necessary

• MED activities including identification of local entrepreneurs/MSMEs,

 Micro Enterprise Development
arranging necessary finance and technical assistance for them
(MED)
• Ongoing activity even after mini-grid plant becomes operational

Source: Rockefeller Foundation’s Smart Power for Rural Development Program

Micro-grid Cost Breakdown – Example from India

Source: CSE Report India, 2016

Micro-grid Tariff Setting

Source: World Bank ESMAP Program Report on Microgrids in Ghana

Micro-grid Tariff Options

Source: GIZ/Micro Energy Credits/Inensus/ARE, 2014

 Renewable Energy Micro and Mini
Grids – Risks and Mitigation Measures
Risk Mitigation Measures

• Develop mini-grids in locations not too close to the main grid

• Include grid integration elements into system design

Grid Electrification Risks (Business
Risk) • Work closely with government/utilities on grid electrification plans

• Sign agreements with govt/utility that a PPA will be signed with the
utility (at FiT, if possible!) when grid arrives
• Develop a robust consumer credit risk appraisal system – to be
conducted as part of upfront site appraisal/selection process

Consumer Payment Risks (Credit • Conduct household income/energy expense surveys, use credit
Risk) history from Microfinance Institutions

• Pre-paid or pay-as-you-go metering solutions

• Community Engagement

• Built into system design, so that system is modular and

components can be replaced later
Technology and Product Risk
• Constantly monitor technology and market development

• Supplier/manufacturer warranties to protect against product failure

 Renewable Energy Micro and Mini
Grids – Risks and Mitigation Measures
Risk Mitigation Measures

• Load estimation done rigorously at the time of site

surveys/selection
Capacity Utilization Risk (Lower
• Load acquisition and micro-enterprise development
than Estimated Uptake of Electricity
from customers)
• Strategies for managing seasonality of load

• Grid integration
• Use domestic sources of finance (local currency)

Foreign Exchange Risk • Purchase foreign currency swaps as hedging measures

• PPA/Tariffs indexed to USD

• Constant dialogue with government/regulators
Regulatory Risk
• Involve Bilateral/Multilateral agencies in a policy dialogue with
government

• Robust internal operational systems

Operational Risk • Training and internal audits

• Legal and compliance

Micro-grid Development – Best Practices

Source: UN Foundation, SE4ALL, Carnegie Mellon University and UC Berkeley Report, 2014
Renewable Energy Micro and Mini Grids –
Tools for Due Diligence and ESCOs
GeoSim GoeSim is a decision support tool for least-cost electrification

Network Planner Network Planner is an online tool for planning grid, mini-grid and off-grid
electricity from community to national scale.

LAP LAP is a software tool for technical and economical evaluation of Low
Voltage electrification projects. After calculating the electrical behavior of the
LV network (currents, voltages, losses, etc.), LAP generates the bill of
materials of necessary investments.

developmentmaps.org DevelopmentMaps.org is aimed at development projects in emerging

markets, detailed household location data can be used for master plans for
rural electrification, both off-grid mini-grid design and grid extensions

SWARM Software PowerHive is a US-based company that is currently implementing Mini-Grid

projects in Kenya and Philippines. Their SWARM software analyses satellite
data and automatically identifies suitable sites for mini-grids through density
of built environment.
Homer Software HOMER (Hybrid Optimization of Multiple Energy Resources) software
simplifies the task of designing hybrid renewable micro-grids, whether
remote or attached to a larger grid. HOMER's optimization and sensitivity
analysis algorithms evaluate the economic and technical feasibility of a large
number of technology options and to account for variations in technology
costs, electric load, and energy resource availability
Questions?