Proposed Rural Energy Services Company (RESCO) Model to scale-up Rural Energy

Earlier blog 'Poor Rural Energy access & delivery inspite 'High Need' and 'High Willingness to Pay' discussed the key issues in raising a scalable delivery model for Rural Energy/Electricity. This blog propose a potential model to attend to this cause. All discussions on the model are invited with broad objective to engage with right stakeholders to pilot a workable solution. The growing interest in Rural Franchisees could provide such an opportunity. 

A Rural Energy Services Company (RESCO) model is an exploratory institutional framework which will manage risks via a systematic analysis of information from various stakeholders in order to fulfill the energy needs of the rural consumers and the requirements of financial viability for all the participants in the energy supply chain.  This model complements the basic functionalities of energy services companies (that currently operate in either government or private sectors) with elements which are essential to the success of integrated last mile energy delivery to rural localities. Some of the features of the RESCO model, its functions and benefits to the rural energy economy are as follows:

Proposed Rural Energy Services Co. (RESCO) model (Source: pManifold & IFMR Trust)

Poor Rural Energy access & delivery inspite 'High Need' and 'High Willingness to Pay'

The term rural electrification conjures up a variety of images - from Shah Rukh Khan dramatically generating hydro-electricity in the Bollywood film ‘Swades’ to the more mundane government schemes extending distribution infrastructure to far flung villages in India. But for all the efforts invested in this idea and the buzz which it generates, it is sobering that there has been no substantial change in the status-quo of a typical Indian village chosen at random.

The remoteness and scattered topology of many villages makes electification via grid accessibility a non-viable option for them. Even in cases where the government has been able to extend  the national grid, difficulties with O&M, billing, collection, high Aggregate Technical and Commercial (AT&C) losses and poorly targeted subsidies causes a net loss to utilities which is a barrier to their ability to sustainably and continuously serve the rural areas. The poor quality of supply and services in addition to misleading political promises tends to further reduce people’s participation in the process resulting in abuse of the infrastructure. This failed last mile distribution has limited the benefits of private distributed generation (biomass, solar, hydro, wind etc.) to villagers, since utilities do not have financial incentives to serve the rural feeders with high costing power.  Ironically lower affordability by rural users is the most cited concern, despite the fact that they pay much more for energy usage than their urban counterparts.

A low-income rural household without electricity connection consumes on average 2-3 litres of kerosene per month for lighting, the cost of which escalates further if kerosene cannot be procured via the public distribution system. This scenario has given rise to a large market for local Diesel Genset (DG) operators, with usually 2 of them serving around 300 households. They supply 5 hours of power per day for a single 8W CFL bulb per household at a bartered rate of 2 litres of kerosene or Rs. 50 per month. Each household therefore pays Rs. 26 per month (when paid in terms of 2 litres public distribution system sold kerosene), equivalent to Rs. 22 per unit of electricity (kWh), which is at-least five times the rate paid by a grid connected user. The DG operator’s running expense comes out to be Rs. 20 per consumer per month for which he gets Rs. 50. DG distribution, other than its cost economics and environmental effects, is a good delivery model on account of its portability, easy access to fuel, reliable supply, flexible payment options and local ownership.

Solar PV System Workshop -Technology, Risks, Manufacturing, EPC, O&M and Investment

pManifold as Knowledge Partner to IIES 2011 organized a workshop on 'Solar PV System – Technology, Risks, Manufacturing, EPC, O&M, Investment'. The workshop brought best Industry experts and participants through out the country.

pManifold Indis_Solar PV_IIES_Workshop_report

View more presentations from pManifold

Rural Franchisees - Could they become pilot ground to raise next level of Distribution services?

A recent publication from Prayas on 'Rajiv Gandhi Rural Electrification Program - Urgent need for mid-course correction' gave a very good overview of RGGVY program, its features and progress. Some key observations made:

1. Total 1.1 lakhs Rural Franchisees in India (detailed distribution given below)
• This covers only 19% of total villages in the country including both the RGGVY and non-RGGVY villages 
• Only 38% RGGVY villages are covered under Franchisees, when all are supposed to have mandatory Rural Franchisees
• 95% of total Rural Franchisees are Revenue Collection based Franchisees
• Bihar, Gujarat (91%), Haryana (91%), Karnataka (73%), Nagaland, UP and West Bengal have above national average (i.e. 19%) Rural Franchisees in RGGVY villages
  
2. Rs. 26000 cr. already spent in last 6 years since 2005 and estimated another same amount to be spent (totaling to Rs. 52000 cr.) for coverage of RGGVY original targets of 100% village electrification and 2.34 cr. rural BPL household connections.
• Since 2005, 96562 villages have been electrified raising the level of ‘village electrification ’ from 74% to 91%. (Total villages in India is ~6 lacs, out of which 1.25 lacs did not have access to electricity in 2005)
• Since 2005, 1.75 crores rural households are given new connections raising the level of ‘rural household electrification’ from 43% to 56%. (Total # of rural households in India is ~14.5 crores, out of which 7.8 crores did not have access to electricity in 2005)
  
3. By estimate of investment, of order Rs. 52000 cr., RGGVY scheme is comparable to R-APDRP scheme of GoI. 

State-wise Rural Franchisee distribution in India (Source: MoP website)

Impact that could come from Utility Measurements, Analytics and Monitoring

There are ongoing lot of controversies about Power Distribution Franchisee (DF) applications and transparency of businesses running them. While some of them are definitely right and need to be intervened, but many of them are arising from missing information. Our earlier blog 'Lack of good baseline data & reporting leads to irrational Power Franchisee bidding' discussed the impact of this missing information on all stakeholders connected to Distribution Franchisee.

A perspective 'What's there in Distribution Power Franchisee?' was shared earlier. In line to that and at an abstraction level of a model, DF is about driving Measurements & Analytics, establishing baseline and monitoring performance to excel baseline and set a new one. The transition to a private ownership is one approach, which is believed to yield faster results. But it is not impossible to drive efficiency through state utilities by strict enforcement of driving interventions based on Measurements and Analytics. R-APDRP is one such attempt, but the gaps in handling the associated change management has led to increasing questions on real impact of the scheme - 'R-APDRP: Missing understanding on usability of technology by utility people'

Below is a visualization of positives that could come in the Indian power distribution sector through deeper acceptance and embedding of philosophy of measurements, analytics and monitoring.

Challenges with scaling Power Distribution Franchisee Model

Power Distribution Franchisee (DF) remains a new and big canvas in India's Power Distribution sector with few painters and there is not much history to build and learn from others. While 'learning' from 'doing' is way forward, but still there remains a gap in Distribution Franchisee Thought Leadership to establish and quantify DF's potential impact and lay strong 'model' driven design. So while different tuning of parameters could happen from one implementation to other, the base model should grow stronger with collaborative knowledge and best practices sharing.

Some critical design issues that needs addressing to scale Power DF model are discussed below. The issues are addressed in order of execution of DF model.

1. Performance benchmarking of power utilities: This aspect is seriously missing in utilities inspite of enormous MIS and Energy Audit data available. At first place, the data completeness, it's authenticity and its time aggregation process to produce MIS report and KPIs is highly questionable. The derived operational KPIs like SAIFI, SAIDI, ATC etc. have hence lost their absolute meanings and its always chasing some incremental improvement without focusing on the end-consumers. Also, since the utility financial losses could be easily passed to end-consumers in next year ARR and increased tariff petition, there is not much good incentives for utility to perform. There is a need to develop a more integrated framework for performance benchmarking and regular monitoring.