Wider Scope

Increasing role of microgrids in the industry

Microgrids have emerged as one of the key technologies in the ongoing energy transition. A microgrid is a small, independent energy network, which can provide electricity to local communities. It consists of interconnected loads and distributed energy resources. The key drivers of the microgrid market in India have been an unreliable main grid, lack of electricity in rural and remote areas, and the government’s renewable energy targets and commitments. Microgrids are mainly being installed in areas in India where the grid is not accessible, or has limited penetration. Microgrids are also finding industrial applications.

Microgrids can generate power from both renewable and conventional power sources. Microgrids in India are largely based on hydro, gas and diesel with some installations based on renewable energy resources including biomass, wind and solar. In recent years, the focus has shifted to solar power-based microgrids with energy storage capabilities. While a number of initiatives have been taken by the government to promote microgrids, certain challenges in the industry are impeding large-scale deployment. These include the capital-intensive nature of projects, inadequate financing options, and low returns. A look at the microgrids industry in India…

Key drivers and applications

The electrification of remote and rural areas is one of the key applications of microgrids in India. The rough topography in states such as Jharkhand, Kashmir, Arunachal Pradesh and Bihar does not allow grid extension. In 2017, two villages in Bihar, Tayablur and Behlolpur, were provided access to electricity with the installation of microgrids by Tata Power Delhi Distribution Limited. Although significant progress has been made under the Saubhagya scheme with less than 20,000 households (in Chhattisgarh) remaining to be electrified, the quantum and quality of power supply remains a cause for concern. Microgrids not only provide connectivity, but also ensure 24×7 power supply.

Microgrids are ideal for supplying electricity to islands like Andaman & Nicobar and Lakshadweep as well as coastal cities. It is often difficult and expensive to extend the grid to such areas, which face extreme weather conditions (hurricanes, cyclones, etc.). Microgrid solutions have also found industrial and commercial applications. They provide uninterrupted power supply to hospitals, defence establishments, textile industries, data centres, etc. for seamless operations. Microgrids can also be deployed to support coastguard installations, port development projects and telecom towers. Interestingly, even cities with well-developed electricity grids are looking at microgrids as an option for islanding in order to receive uninterrupted power supply. Microgrids have the ability to seamlessly separate and isolate themselves from the utility during a grid disturbance. Hence, they provide resilient power backup in case of interruptions due to faults or natural disasters.

Discoms in India are facing high aggregate technical and commercial (AT&C) losses, and are under immense pressure from the central government to limit their AT&C loss level to 15 per cent. Since microgrids supply power to a small area, they have the potential to help reduce losses. Further, renewables-based microgrids can play a significant role in achieving the renewable energy targets and reducing carbon emissions.

India’s electric vehicle (EV) targets are also likely to drive the growth of microgrids, which will ensure adequate power supply to meet the EV charging requirements. Car batteries can be installed in microgrid systems to store energy and supply it when needed.

Policy framework

The Electricity Act, 2003, mandates the central government to formulate policies for setting up stand-alone systems for rural electrification and utilising renewable or non-conventional energy sources. In this regard, various policies have been formulated to promote renewable energy, energy access, rural electrification and off-grid generation. These include the National Electricity Policy, 2005; the National Tariff Policy, 2006; and the Rural Electrification Policy, 2006.

To promote microgrid deployment in the country, the Ministry of New and Renewable Energy issued the draft National Policy for Renewable Energy-based Micro and Mini Grids in June 2016. The policy aims to develop 10,000 mini- and microgrids with an aggregate capacity of 500 MW by 2021 by making the tariff determination process more flexible. The policy has not yet been finalised. The importance of microgrids in areas where the grid has not reached or where adequate grid power is not available was highlighted in the Tariff Policy (revised in 2016). It also stated that the investment involved in setting up such microgrids is substantial. There is also the risk of the grid reaching an area before the completion of the project life. Since power from microgrids is costlier, this will make the project unviable. In order to mitigate such risks and incentivise investment in microgrids,  an appropriate regulatory framework to mandate the purchase of power from such microgrids is needed. The appropriate commission shall notify the regulations in this regard within six months.

Technology developments

Microgrids have evolved over time, becoming much smarter and more advanced. They have been increasingly adopting renewable energy sources. India’s Model Smart Grid Regulations define a smart microgrid as an intelligent electricity distribution system that interconnects loads, distributed energy resources and storage within clearly defined electrical boundaries to act as a single controllable entity.

Microgrids are now being complemented with energy storage systems, which allow them to cut down planned and unplanned outages. Four microgrids based on solar power with lithium-ion battery energy storage systems were commissioned by BSES Yamuna Power Limited (BYPL) in March 2019. With 5-7 kW rooftop solar plants and 7-10 kWh batteries, the microgrids have been procuring only 8 per cent of their requirement from the grid. Further, microgrid controllers enable efficient management of various energy resources while also facilitating connection/disconnection from the main grid. Other features of smart microgrids include resource and load profiling, controlling and forecasting, demand response management, voltage support, prioritisation of load as critical or non-critical, real-time acquisition and monitoring of data, and fast response to network disturbances.

The use of space/satellite technology in the installation and operation of microgrids in India is being assessed by the India Energy Storage Alliance along with the European Space Agency, through its “Space4Microgrids – India” programme. Satellite data related to system site and local renewable energy resources is expected to enable better decision-making, thereby reducing project risks and costs. Further, it can make the maintenance and operations of microgrids more efficient.

Despite the benefits they offer, microgrids continue to face a number of challenges including lack of awareness, inadequate policy support, absence of low-cost financing (due to lack of proven track record), resistance of discoms (loss of consumers and revenue) and the unwillingness of consumers (reluctance to pay for the more expensive microgrid power as against subsidised grid power). Even though policy measures have been initiated to overcome some of these challenges, they are far from being finalised.

Meanwhile, efforts by states and private players continue to promote microgrid development in the country. Uttar Pradesh issued its mini-grid policy in 2016 to promote the implementation of microgrids in the state. Jharkhand also formulated its draft mini-grid policy in 2018.

Net, net, microgrids are an ideal solution for supplying power to remote and other areas, where power from the main grid is not available or is not sufficient. Microgrids can also be deployed in areas that are connected to the main grid to cover consumers in case of a national power outage. Microgrids also contribute to the transition of the Indian power sector to renewables, EVs and smart grids.


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