SPEED: Smart Power for Environmentally-Sound Economic Development

June 17, 2014

Shaping India’s market for decentralized renewable energy mini-grid

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The problem in India:

• Bihar, Jharkhand, Orissa, and Uttar Pradesh all have official electrification rates below 30%.

• Electricity is often erratic - unviable for productive loads

• 20-25 more years for the least electrified states to be fully grid-connected

• “Last mile” connections to rural villages

India has the largest un-electrified population in the world: 306 million

▪ Overall electrification rate: 67%

Urban

55%93%

Rural

Summary of electrification scenario in India

Electrification of rural householdsPercent of rural households electrified

Uttar Pradesh (UP)

Bihar

Jharkhand

Odisha

Less than 40%40 - 59%60 - 79%>80%

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SPEED can capitalize on innovative mini-grid technology to unlock the rural electrification market

SOURCE: Team analysis* 1 household represents ~5 individuals

Devices Solar Home

Systems

Pico-grids

▪ Lighting only

▪ Requires daily charging

▪ Covers < 1 household*

▪ Lighting only

▪ Small appliances

▪ Covers 1-2 households

▪ Lighting only

▪ Fixed amount of electricity

▪ Covers 40 households

Alternatives to grid electrification – SPEED compared to other models

RF SPEED

Mini-grids30+ KW

▪ Lighting, productive loads

▪ Room for grid growth

▪ Covers 1 village (~150 households)

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Rising diesel costs

Growth of telecom towers in rural India

Green policy

Shortage in grid power availability at more than 70% of tower sites . . .

> 20 Hrs

16-20 Hrs

12-16 Hrs

8-12 Hrs

< 8 Hrs

10%

25%

15%

20%

30%

Grid power supply

% of Telecom Towers (2013); 100%=422,000 towers

Telecom towers

Parts of Bihar, North East, UP & J&K

Mostly rural areas

Semi-urban areas

Major cities apart from metros

Metros like Mumbai, Kolkata, Chennai; Gujarat and Punjab states

Typical regions

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Current challenges for ESCOs trying to enter the mini-grid market for lighting and productive use

Current challenges What ESCOs need

Unpredictable demand Assured, predictable demand

Operation and logistic complexities

Ease of operations in serving the target market

Limited financing options Access to financing and low-cost capital, including government subsidy

Policy uncertainty Visibility into long-term viability; degree of confidence in market stability

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The SPEED model is designed to address these challenges

Develop and convert micro-enterprises to renewables

Provide risk capital

Facilitate PPAs between Telecoms and ESCOs

Community engagement and monitoring

Government partnerships and engagement

Renewable energy plant

Mini-grid

Regulators/ government

Funders/ financers

Other enablers (e.g., NGOs, village committees)

Generating ESCO

Micro-utility ESCO

Integrated Energy Service Company (ESCO)

Rural house-hold

Produc-tive loads

Anchor load

(Telecomtower)

Provide project development support

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SPEED offers competitive pricing across all three customer segments

SOURCE: SPEED Tariff document, SPEED PPE Model, Barefoot Power report (May 2009), team analysis

SPEED model pricesCurrent energy cost

~ $ 0.5/kWh ~ $0.3 - $ 0.4/kWh

House-holds

Productive Loads

Telecom Towers

$ 0.4 – 0.5/kWh(DG sets)

$ 0.3 – 0.4/kWh

Other loads

$ 2.5/month(2 bulbs + 1 charging point)

$ 3 – 4/month(1 or 2 kerosene lamps +

phone recharge)

10 – 30 lumens/lantern 300-500 lumens/bulb

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Impact of scale (100 plants – corporate-level1) and clustering on IRR of base case model (%)

SPEED’s value proposition: Scale and clustering benefits

19-20%

Equity IRR at corporate level

Project IRR at corporate level

15–16%

Overheads

0.2%

OpExbenefits

1.5–1.8%

CapExbenefits

Base case for single

plant

Low-cost debt

2.5–3%

3-4%

11.6%

12-14% reduction in overheads

10-13% reduction in CapEx

18-20% reduction in OpEx

Concessionary debt

1 Corporate level assumes clustering, in this case 5 clusters of 20 plants each

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SPEED’s 1,000 Village Plan for India

SOURCE: Census 2001, Census 2011, team analysis

1 The number of households at each level includes only rural households

India168 mn households1

45% unelectrified

Priority States61 mn households78% unelectrified

Priority Districts14 mn households93% unelectrified

PotentialClusters

4 priority states

Four of the least electrified states in India – Uttar Pradesh (UP), Bihar, Odisha and Jharkhand

Districts with household electricity penetration rate of less than 10%

Potential clusters

Sites with villages within 1 km of Telecom tower

Initial focus will be on 2 states (Bihar, UP)

Scale and clustering benefits

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