How a small village in Gujarat can address India’s dual problem of power subsidies and ground-water depletion.
By Akhilesh Magal
The weakest link in India’s power sector is the power utility. India’s power utilities have accumulated total losses of over INR 3.8 trillion ($55 billion) and an accumulated debt of INR 4.3 trillion ($63 billion) [PIB]. These numbers are staggering. In comparison, the total income tax revenue for India for 2013–2014 was only INR 2.4 trillion ($35 billion).
The power sector has been plagued with financial imprudence for several decades. There have been several unsuccessful bailouts over the last few years, the last being the FRP or the Financial Restructuring Package announced by the previous Government in the year 2012. More recently, the Power Ministry has announced the UDAY scheme that aims to turn around the power sector – once and for good. The UDAY scheme is similar to it’s predecessors in the fact that it lays down strict targets for India’s power distribution companies (called discoms), however differs from earlier schemes in the fact that the Central Government does not provide grants to cover the losses. Under the UDAY scheme, the State Governments take over the loans and in turn bonds are issued to raise additional capital. The key question though is what guarantee is there that the discoms will turn a new leaf?
The fundamental reason why most Indian discoms are in the red is due to political interference in setting power prices and metering electricity. The lack of competition in the power sector (i.e. you cannot choose your utility company unlike a telephone operator) exacerbates the situation, as it offers no incentive to provide reliable and cheap power to consumers.
The agricultural sector contributes to nearly 23% of India’s electricity consumption. This power supplied to this sector is nearly free – again thanks to political pandering to garner agrarian vote banks. States like Gujarat have successfully separated rural feeders into agricultural feeders and household feeders. The household feeders largely have access to uninterrupted power throughout the day. The agricultural feeders receive power only during specific times – mostly during the night when excess power is available. This creates a problem for farmers who have to stay awake to irrigate their fields. Most farmers circumvent this problem by leaving their pump sets switched on throughout the night. This method of flood irrigation is wasteful and is responsible for the rapid depletion of India’s underground aquifers.
Solar Pumps – A Potential Solution
Solar pumps are a boon to farmers, as they provide high-quality power that is available throughout the day. Solar pumps have been rapidly deployed in many states across India, such as Uttar Pradesh, Rajasthan, Gujarat, and Karnataka. As per official estimates from the Ministry of New and Renewable Energy (MNRE), India has installed over 23,000 pumps for irrigation as of April 30, 2016 [MNRE].
While solar pumps can bring significant benefits to the farmers, one major drawback is the impact of these pumps on the groundwater. Solar pumps provide farmers with free and unlimited access to energy during the daytime. This means that the farmers have no incentive to conserve ground water. One major change is the move towards water-intensive crops such as rice and sugarcane. Second, the informal, yet highly organized water-markets in rural areas thrive due to unlimited access to groundwater. Farmers with deep borewells extract and supply water to smaller farmers who cannot afford a borewell. The water is transported through extensive water pipelines laid down by the farmers themselves. It is an attractive business, with farmers charging nearly 100–200 rupees for an hour of water. Solar pumps help farmers exploit this market throughout the day.
The combined effect of access to high-quality daytime power and the water business can lead to a rapid depletion of India’s already depleted ground-water table.
Dhundi Village – The World’s First Cooperative Solar Enterprise
To overcome this problem of groundwater exploitation, one possible solution is to connect the solar pumps to the grid. These systems function very similar to net-metered solar homes. Farmers now have a choice between using daytime solar energy to pump water or to use these systems to generate energy and sell it to the grid. Farmers are remunerated for every unit of power that is recorded by meters and sold to the local distribution utility.
This choice that farmers have to make will depend on several factors:
- The power purchase price for solar energy.
- The demand (and price) for water from the informal water distribution network.
- The cropping patterns and irrigation need for the crops.
The premise is that if the power purchase price for solar energy is high enough, then farmers will make adequate money that in turn will prevent them from exploiting ground water.
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We selected a small village to test this hypothesis out. The village is called Dhundi in Central Gujarat, India. The village did not have access to the agricultural grid. This meant that the farmers here used expensive, noisy, and polluting diesel pumps to pump water out of the ground to irrigate their crops. We replaced the diesel pumps with grid connected solar pumps, installed meters to record the energy, entered into an agreement with the local distribution utility (MGVCL) to buy back any excess power at the rate of INR 4.63/kWh. Six farmers opted into the scheme – three farmers with 5 HP pumps sets and three farmers with 7.5 HP pump sets. The farmers paid roughly 20% of the price of the pump, while the remaining capital came from the research grant.
While states like Karnataka have announced similar, the difference in our pilot project is that we brought together farmers in the form of a cooperative. Farmers now pool their excess power and sell this to the utility, instead of each farmer having an independent agreement with the discom. This helps in two ways:
- The discom has lesser transactional costs and overheads in managing and recording each agreement with every farmer.
- A community-based approach reduces the chance of any one farmer stealing power from his neighbor’s grid. Cooperatives are self-regulatory in nature.
The benefits of this model to various stakeholders are:
To the Farmers
- Provides an alternate income to farmers and raises the standard of living in rural communities. It also “climate proofs” the farmer against the vagaries of climate change by serving as an insurance policy. Farmers needn’t take drastic measures such as suicide in the event that the crop fails due to drought or floods. They now have an additional and stable source of income.
- Provides farmers high-quality daytime power – something that every farmer dreams of. No more sleepless nights and somnambulistic strolls to his farms in the depth of the night.
To the Utility
- The biggest benefit to the utility is the fact that utilities are released from the burden of supplying power to the agricultural segment. This means that the utilities reduce their subsidy outlay to the farmer. Once enough volume is reached, this will significantly transform the finances of the utility.
- Every utility in India must meet the Renewable Purchase Obligation (RPO). The RPO varies from state to state and the enforcement has been lax so far. However, with the National Tariff Policy being amended in 2016, the RPO is now raised to 8% by 2022, in line with India’s solar ambitions under the National Solar Mission (NSM). India wants to achieve 100 GW of solar by 2022, out of which 40 GW will come from distributed systems. While the government has stressed on distributed rooftop solar, one should not rule out distributed grid-connected agricultural solar pumps. The potential is significant since rooftop solar systems require large roof spaces, which are a scarce commodity in India’s crowded and packed cities.
DISCOMs can meet their RPOs from such models. This is financially more attractive than buying solar power from rooftop solar system (which tends to be expensive). On the other hand, while solar parks bring about rapid cost reduction due to the sheer size and scale, there are transmission losses that have to be borne and acquiring land in India is a significant challenge.
- Reduction in distribution losses since the power generated and consumed is at the same geographical point.
To the Country
- Groundwater exploitation is minimized. If off-grid solar pumps had taken the place of on-grid pumps, then there would have been no incentive for farmers to conserve water.
- RPOs are met in a distributed and cost-effective way. Large solar plants involve vast tracts of land which are hard to acquire in India.
- Jobs are created in rural communities and people participation is ensured in India’s 100 GW solar goal.
- India need not spend on expensive social programs such as crop insurance schemes and other schemes to alleviate farm poverty. Solar pumps are assets that produce useful energy.
The pilot at Dhundi, Gujarat, presents a feasible solution to reduce the agricultural electricity consumption from the grid, thus eliminating power subsidies that are inherent to India’s power sectors. Every unit of electricity that is evacuated onto the grid will mean that groundwater remains under the ground. The key challenge would be to arrive at the right number for the buyback of power – a number that is acceptable to both the farmer and the utility. In a scenario of rapidly falling solar tariffs, this is indeed a challenge. Nevertheless, Dhundi demonstrates that small yet simple solutions can go a long way in solving India’s power and water problems.
About the Author: Akhilesh Magal is the Head Advisor – Solar Energy for the Gujarat Energy Research and Management Institute (GERMI), an institute dedicated to research in the fields of solar energy, energy efficiency, environment, and petroleum research. He is an environment engineer from Carnegie Mellon University and is an expert on solar policies and grid integration of renewable energy. He can reached at: firstname.lastname@example.org