Why electricity need not be a wide area networking business at all.
In typical networking businesses – telephone, internet, electricity – as networks expand out from population clusters and into rural areas, their economics deteriorate geometrically. Investments are difficult to justify, and therefore internet access, cellular coverage, and electricity availability are poor, or nonexistent, in rural markets.
For equity reasons, and because these services are seen as “public goods,” a variety of ingenious policies – universal service fees, subsidies, preferentially targeted communities, aid to cooperatives, and support to novel technologies – have been tried, with fair results in the industrialised world.
Now there is good news for rural electrification: microgrids. “A microgrid,” according to Professor Robert Lasseter, a pioneer in the field from the University of Wisconsin, “is an integrated energy system consisting of loads and distributed energy resources operating as a single system, either in parallel with, or islanded from the power grid.” They can be expanded easily with plug-and-play additions of generation sources.
Electric utilities have historically been regarded as “natural monopolies”.
But the importance of economies of scale in the electricity business has declined, thanks to a dramatic drop in solar panel prices, new fuel cell technologies, biofuels from waste, and next generation internal combustion engines. Anyone now can be his own economical electricity producer.
The result: Rural electrification can be independent of grid extension. And there is now recognition with profound industry-wide implications that electricity service need not be a wide area networking business at all.
MICROGRIDS AND RGGVY
For India’s Rajiv Gandhi Grameen Vidyutikaran Yogana (RGGVY) which focuses on grid extension for 300 million people without electricity, microgrids are a natural complement.
Thousands of them can function independently while incrementally reaching toward the existing electricity grid, and eventually tying up with it.
Ten years ago, one could argue for using subsidies to extend the grid to rural areas, one village at a time, or for giant coal-fired ultra mega power projects.
Yet now, the merit of centralised, large-scale electricity generation, whether coal, nuclear, or hydro-based, is questionable. Distributed, self-sufficient, community-oriented, solar-assisted, battery-backed, and diesel generator-aided electricity microgrids are hot, perhaps the Next Big Thing.
When discussing renewable energy, we speak of solar, wind, batteries, algae, and fuel cells; India has its National Solar Mission, for instance. But the issue is not about one generation technology or another but rather one of a combination of sources working together to deliver reliable, economical, 24-hour electricity.
If microgrids were commonplace, India’s blackout of July 30-31, 2012, would have had less of an impact; communities would be electricity self-sufficient and off-grid.
SYSTEMS INTEGRATION
Many Indian businesses and households already maintain private diesel generators and inverters, but electricity costs from these are over three times greater than grid costs. With microgrids, that cost differential would shrink.
Military needs partly drove the development of microgrids in the US.
How do you power a military base reliably in hostile environments, or when the grid is vulnerable to cyber-attack, or to hurricanes and tornados? Critical operations in hospitals and sophisticated industries require reliable power.
Lockheed Martin this month launched a microgrid at Fort Bliss, Texas.
Over a billion and a half people worldwide need a modified version of that microgrid for basic electricity access.
The rest of the world also needs it in order to lower electricity bills, reduce warming emissions, ensure local control, and guarantee reliable power.
So powerful is the impact of distributed generation – solar on rooftops and microgrids – that the industry structure of the existing electric utilities is under challenge worldwide, much as local exchange competition (Competitive Local Exchange Carriers – CLEC) and wireless in the US challenged traditional, wireline telephony.
The World Bank is hosting a timely online discussion, “live” as I write, with participants from countries including Ghana, Laos, India, the United States, and Brazil.
The experts are sharing their experiences and insights: How can microgrids substitute for or complement conventional grids?
RESTRUCTURING the sources
What is still at an early stage, and requires policy support, is the optimisation and systems integration of the various, region-specific generation sources mapped to demand.
The tools and technologies exist; we need to study the economics and sensitivities under local conditions. While the microgrid principles are sound, one size does not fit all.
India should deploy a dozen microgrid pilot projects across the country and design modular, scalable, and customisable solutions for rollout. The programme can be under RGGVY and also as an extension of the National Solar Mission.
Where do microgrids administratively belong? Both the Ministry of New and Renewable Energy and the Ministry of Power should sponsor them; microgrids straddle both ministries.
The two-Ministry structure should not hinder the electrification cause.
The World Bank and its IFC affiliate should support microgrids technology transfer and pilots. This would send a strong signal emphasising the timeliness and importance of distributed renewable electricity for poverty alleviation, sustainable development, emissions abatement, and rural empowerment.
Since microgrids have applicability beyond the rural areas, World Bank support can catalyse new clean energy businesses for the world.
(The author is a visiting Professor of Strategy at IIM, Kozhikode.)