OFID’s scalable, replicable, clean rural electrification project in Jharkhand, India
The private sector has an important role to play in helping to scale-up minigrid projects. However, the initial installations of such projects—often in remote villages with low per-capita income - carry risks that the private sector may not be willing to accept. OFID co-operated with the Alliance for Rural Electrification (ARE) - an international not-for-profit association representing the decentralized energy sector - to support the deployment of private sector-financed minigrids to increase access to modern and affordable energy in developing countries. Four ARE members received grants from OFID providing a de-risking mechanism for business ventures through cost-sharing.
One project in this program involves the installation of solar PV / diesel hybrid minigrids in rural villages in the Jharkhand region of India. By December 2016, the project implementer, MLINDA Association, had commissioned minigrids in the villages of Narotoli, Pasanga and Shahitoli. The below table shows the installed capacity and the number of beneficiaries per village.
Nearly 50 jobs or micro businesses—including plant operators and plant technicians who were trained by MLINDA have already been created in the three villages as a direct result of the project. Currently, several performance indicators are being monitored, including the amount of energy produced per year, tariff collection, the average increase of income as a result of electricity connection and the decrease in the amount of health spending.
The provision of a stable and reliable access to electricity in rural areas does not only mean light but it is a major social, economic and environmental change that contributes to the alleviation of poverty, illiteracy, hunger & thirst, disease, etc.
The rural and tribal communities in India’s Gumla district of Jharkhand State are among the most disadvantaged in the country. 85% of the population in these villages is considered disadvantaged, marginalized communities. Only 10% of the people in the area have completed higher secondary schooling. Mainly subsistence farming and cash crops form the mainstay of the economy. Inadequate access to electricity for irrigation and markets for their produce limits enterprise. In addition, villagers spend significant resources on kerosene for lighting and expensive charging services for devices such as cell phones. Farm machinery is run on diesel which is price-volatile. Beyond a reduced quality of life, economic opportunities are constrained.
The Mlinda Foundation has been working with the villages in the region, installing solar based mini-grids, which enable agricultural producers to increase their output and facilitating sustainable growth capitalizing on the increased production. In 2016 Mlinda received a grant from OFID for the “Rural Electrification Project - Phase 1.” An impact study conducted in January 2018 found that in the three villages where OFID–funded mini-grids have been installed GDP grew by 12.7%, leading to an energy carbon efficiency improvement of 115% and farm incomes growth by over 10%.
In June 2018, OFID approved an additional grant to Mlinda to support the installation of 41 mini-grids, with a capacity of 20 to 40 KW each and an overall capacity of 1,150 Kw. The mini-grids will generate 24x7 electricity to power productive agriculture loads. This will be combined with capacity building to improve farm productivity, the sale of energy efficient appliances (e.g. irrigation pumps, rice hullers, oil expellers, cold storage, lamps, fans and TVs) and the provision of long term repair and maintenance services.
The proposed project is expected to benefit 4,100 families (20,500 people) as direct beneficiaries, in addition to over 2,000 people who will be indirect beneficiaries including vendors, suppliers, warehouse operators, transporters, labor, skilled tradesmen, mini-grid operators, community workers, neighboring villages that sell agri-produce to the micro-enterprises in the target villages, consumers of pesticide free organic oil and wheat flour produced by the micro-enterprises etc.
OFID’s Tajikistan Mini-grid SMEs Support Project
Tajikistan is faced with challenging geography, as it is 93% mountainous and landlocked, with limited access to other regions. Approximately 70% of the Tajik people suffer from extensive shortages of electricity. Although 90% of the population is connected to the grid, electricity services are not reliable. Except for the larger cities, electricity is supplied to the population for 2-8 hours per day, with poor quality of energy supply (frequent outages, reduced voltage, etc.). The rural population makes up 75% of the total population, but uses less than 10% of the total volume of electricity. Annually, due to electricity cuts in rural areas, agricultural losses reach 30% and many small economic entities cannot operate. Reliable power supply is critical for Tajikistan’s economy and poverty reduction goals. Without reliable, affordable electricity throughout the year, businesses cannot invest, operate and create jobs; hospitals and schools cannot function fully or safely with frequent power cuts during winter; and citizens suffer indoor air pollution from burning wood for heating and cooking.
Alternative green energy technologies have not been implemented yet in the country. The unmet demand for electricity combined with households’ current spending on alternative fuels such as wood and kerosene in the winter, represent a potentially large market opportunity for decentralized energy services in rural and mountainous areas, and simultaneously an opportunity to alleviate poverty and boost local economic development. This business niche would benefit from the substantial renewable energy sources that have not yet been harnessed due to the long-standing tradition of relying on fossil fuels, lack of experience, and high initial costs of introducing alternative energy systems and hybrid mini-grids. Entrepreneurs have not yet actively pursued this opportunity due to the presence of many market barriers.
OFID is financing a project in Tajikistan that seeks to address these barriers. The project, implemented by UNIDO, aims to promote scalable, private sector-led business models for the provision of reliable, affordable and sustainable energy products and services for rural populations focusing on energy access. Specifically, the project will support renewable energy service companies SMEs investing in the construction of mini-grids in remote villages in Tajikistan. These hybrid mini-grids will consist of micro/mini/small hydro power plants, biogas, solar power systems and gasoline/diesel generators as a back-up, with installed power between 10-100 kW.
This project will also support the development of appropriate policy and regulatory frameworks and help capacity building for energy SMEs. It will facilitate access to affordable finance through the creation of a virtual energy access fund / innovative financing platform in cooperation with microcredit institutions and banks.
SOLAR POWERED SMART GRIDS IN HAITI: BROWNFIELD LAUNCH AND MODEL DEVELOPMENT
75% of the people in Haiti lack access to electricity with only about 30 municipal-level micro-grids that supply power at best intermittently. Most of the electricity infrastructure is old and dilapidated. OFID teamed up with EarthSpark International in a project aiming to enhance access to affordable, reliable and sustainable electricity services across Haiti. The project’s specific objective is to develop and launch a town-sized, solar-powered smart grid in Tiburon, Haiti, with a view to validate a business model and investment plan for the construction of another 80 town-sized solar powered smart micro-grids across the country. The solar powered smart grids are expected to benefit at least 200 households and directly impacting 1,000 individuals. Existing businesses and schools will also benefit from the availability of reliable electricity and may encourage further such activity as a result. Future expansion of the grid to proximate structures could indirectly benefit another 1,500 people.