Demand Generation Smart Power Report

DEMAND
GENERATION
FOR SOLAR
MINI GRID
DEMAND
GENERATION
FOR SOLAR
MINI GRID
Acknowledgements
Leadership
Jaideep Mukherji, CEO, Smart Power India
Guide & Advisor

Samit Mitra, Senior Director, Smart Power India
Authors
Satya Prakash Choubey, Associate Director, Smart Power India
Piyush Kumar Prasoon, Partner, Samavit
Soumya harsh Pandey, Partner, Samavit
Sachin Kumar, CEO, Samavit
Prodyut Mukherjee, Partner, En-genuity
Publications Team
Vaishali Mishra, Associate Director, Smart Power India
Himani Gupta, Chip Munks
Karmendra Singh Negi, New Edge Communications Pvt. Ltd.
Special Thanks
All our Mini Grid developers/ESCOs, Micro Enterprise Development and Program
Implementation partners, members of Smart Power India Program Implementation &
Demand Generation team and specifically to all Village Level Entrepreneurs who were an
integral part of SPI's journey.
India has made phenomenal strides in achieving universal electrification.
It is indeed a welcome development that due to the government's
persistent efforts, all villages in India have been electrified and today,
almost 100% households have received electricity connections. Now that
the government has achieved this commendable feat, it is time to shift
attention to the next electrification challenge of providing effective,
quality electricity supply and service not just for lighting purposes but
also for productive use. It has been well established that electricity is a
change agent that improves quality of life and promotes economic
activities.
However, in order for it to work as an effective catalyst, it is essential to ensure sufficient and
affordable electricity supply, delivered with good quality, and supported by good services. While
there has been tremendous progress made in rural electrification with respect to household
electrification, challenges remain in even ensuring basic connections to rural businesses and micro-
enterprises.
It is with this overarching objective, Smart Power India (SPI) established in the year 2015, embarked
on a journey with a vision to drive socio-economic progress of rural customers by ensuring access to
reliable and quality electricity. As of September 2020, we have supported 12 developers in building a
portfolio of over 330 mini-grids in the states of Uttar Pradesh, Bihar, and Jharkhand. These mini-grids
cumulatively serve over 2,80,000 customers – from households and shops requiring simple lighting,
to commercial enterprises, telecom towers, agri-processing, and schools.
The mini-grid sector has proved that reliability is key to unlocking latent demand and achieving the
full economic potential of energy access in under-served regions. Only with access to reliable power
are enterprises likely to employ relatively expensive and sophiscated appliances for productive
purposes. When this happens, we observe a triple-win of improved household incomes, increased
enterprise productivity and higher revenue for mini-grid operators.
The Demand Generation Manual for Solar Mini Grid that SPI has put together aims to address the
importance of electricity for productive use by creating adequate demand among customers. The
focus of this manual is to thus guide practitioners on how to generate demand, impacting the mini-grid
sustainability, supporting micro-enterprises, and the well-being of the rural community. Even though
the described context is predominantly of the Indian mini-grid set up, we do believe that the manual
will be useful for the larger global audience who can replicate the outlined value chain customizing it
to their respective situations.
Jaideep Mukherji
CEO, Smart Power India
“Electricity coming to the village is really a good thing to happen, but the
biggest challenge is how to make the villagers use it for their own benefit”.
This is what I was told by a village Sarpanch (local elected representative)
of Gumla in the Indian state of Jharkhand during one of my initial visits to a
mini grid site. With time, I have realised how prophetic this statement has
been. Electricity is just not only a mean for the development of a village,
but how it's utilised by the inhabitants defines the overall socio-economic
well-being of the community.
Over the past five years, we have witnessed how villages have
transformed themselves from being sleepy hamlets to vibrant
commercial hubs. From distress migration to becoming self-sufficient by taking up farming on their
own pieces of land, women from being housewives to thriving entrepreneurs, villages getting regular
supply of safe drinking water, well-lit roads, access to news and entertainment, accessible health
support systems, but above all the presence of a certain level of confidence, these villages are replete
with examples of community achievement and success stories.
During this journey, the most important thing that we learned, as a team, is not to underestimate the
ambition and ability of rural India. If we are able to understand their needs and also where their
strength lies, and design the programs addressing these aspects, the chances for these programs to
succeed are very high. We usually try to develop a programme sitting in our ivory towers (based on our
best judgement) and then try to parachute it down to the village setting without considering the local
socio-economic conditions or the skill sets prevalent in the local area. In most such cases, the
implemented programmes fizzle out with time.
I have come across the rhetoric of developing successful pilots and proof of concepts for DRE based
productive uses in a lot of conferences, webinars and seminars time and again. We at SPI have been
walking the talk for the past 5 years. We have not only been able to create through our program
implementation team and partners, able proof of concepts for productive use but have also
successfully demonstrated scaling up of profitable and sustainable rural micro enterprises. We
strongly believe that on ground and real-life success stories are the best form of evidences of
sustainable projects that can inspire others to replicate similar activities.
Through this handbook, we have shared our learnings, both successes and failures, so that the need to
reinvent the wheel is reduced for interested practitioners in the field of DRE and livelihood. We do
hope that this handbook proves to be useful for Mini Grid developers, Livelihood development
practitioners, Multilateral Organisations and Investors and above all the rural community who need a
little bit of encouragement and guidance to achieve their dreams. We, at SPI, look forward to provide
support and guidance to all such stakeholders.
Samit Mitra
Sr. Director, Smart Power India
Table of Contents
1. The rationale for mini-grids.................................................................................................................9
1.1 History of rural electrification in India ...............................................................................................11
1.2 The paradox of demand-supply gap.....................................................................................................12
1.2.1 Supply-side issues .......................................................................................................................12
1.2.2 Demand-side issues....................................................................................................................13
1.3 Emergence of mini-grids ..........................................................................................................................14
1.4 What is a mini-grid?....................................................................................................................................15
1.4.1 Benefits and constraints of mini-grids................................................................................15
1.5 Business models for mini-grids..............................................................................................................16
1.5.1 Community-based business model ......................................................................................17
1.5.2 Private sector based business model ..................................................................................17
1.5.3 DISCOM based.............................................................................................................................18
1.5.4 Hybrid business model..............................................................................................................18
1.6 The need for demand generation .........................................................................................................19
2. Demand generation strategy for mini-grids .................................................................................21

2.1 Usage of electricity in a village ..............................................................................................................23
2.2 Segments of rural demand and usage patterns...............................................................................24
2.3 Demand progression at mini-grid site ................................................................................................26
2.4 Demand generation strategy .................................................................................................................27
2.5 Designing an effective communication strategy ............................................................................29
3. Site selection .............................................................................................................................31

3.1 Site selection framework .........................................................................................................................33
3.2 The site selection process for demand generation strategy......................................................34
3.2.1 Site profiling survey....................................................................................................................34
3.2.2 Detailed electricity survey ......................................................................................................36
3.2.3 Load assessment for different customer segments.......................................................37
3.2.4 Load curve study..........................................................................................................................38
3.2.4.1 Day-night variation...................................................................................................38
3.2.4.2 Seasonal variation .....................................................................................................39
3.2.5 Assessing opportunities for new demand generation..................................................39
4. Demand generation for existing loads ...........................................................................................41

4.1 Background ...........................................................................................................................................43
4.2 Identifying potential customers............................................................................................................44
4.3 Load Acquisition (LA) for mini-grid......................................................................................................44
4.3.1 The concept of the energy ladder.........................................................................................45
4.3.2 Communication for meeting existing loads ......................................................................46
4.3.2.1 Message to be delivered to potential customers ..........................................46
4.3.2.2 Partners for delivering the message...................................................................47
4.3.2.3 Communication channels .......................................................................................47
5. Conversion and expansion.................................................................................................................49
5.1 Background ...........................................................................................................................................51
5.2 Importance of commercial motors for mini-grid............................................................................52
5.3 Defining conversion and expansion.....................................................................................................52
5.4 Segmentation ...........................................................................................................................................53
5.5 Customer acquisition strategy ..............................................................................................................53
5.6 Importance of financing ...........................................................................................................................54
6. Demand enhancement through energy efficient appliances ..................................................55

6.1 Background ...........................................................................................................................................57
6.2 What are energy efficient appliances? ...............................................................................................57
6.3 Economics of EEA .......................................................................................................................................58
6.4 Importance of promoting EEAs .............................................................................................................59
6.4.1 Benefits of EEAs to mini-grid consumers ..........................................................................59
6.4.2 Benefits of EEAs to ESCOs ......................................................................................................59
6.5 Factors affecting the adoption of EEAs..............................................................................................61
6.6 Load acquisition strategy by promoting EEAs.................................................................................62
6.7 Need for marketing and finance............................................................................................................63
7. New demand generation....................................................................................................................65

7.1 Background ...........................................................................................................................................67
7.2 Defining a micro-enterprise ...................................................................................................................68
7.3 Data collection for new demand generation....................................................................................69
7.4 SPI’s ‘5S’ framework for new demand generation .........................................................................70
7.4.1 Site assessment............................................................................................................................71
7.4.2 Scale potential ..............................................................................................................................71
7.4.3 Support required .........................................................................................................................71
7.4.4 Sustainability ................................................................................................................................72
7.4.5 Selection .........................................................................................................................................73
7.5 Steps for executing the ‘5S’ framework .............................................................................................74
8. Measuring the impact .........................................................................................................................83

8.1 Background ...........................................................................................................................................85
8.2 Why do we need to measure impacts? ...............................................................................................86
8.3 Approach for impact assessment .........................................................................................................86
8.4 Data collection processes........................................................................................................................88
8.4.1 Establish roles and responsibilities......................................................................................88
8.4.2 Setting baselines and targets..................................................................................................88
8.4.3 Technical and non-technical data collection process ..............................................88
8.5 Challenges with data collection.....................................................................................................89
Annexure 1: Water Treatment Unit .......................................................................................................93
Annexure 2: Flour Mill ................................................................................................................................97
Annexure 3: Oil Expeller .........................................................................................................................101
Annexure 4: Rice Huller...........................................................................................................................106
Annexure 5: Irrigation Pump..................................................................................................................110
Annexure 7: Honey Processing Unit....................................................................................................114
Annexure 8: Mini Cold Storage .............................................................................................................118
1
THE
RATIONALE
FOR MINI-GRIDS
1.1
History of Rural Electrification in India
With the understanding that access to electricity is a vital input in socio-economic development,
policymakers have been focusing on rural electrification since the past many decades. Food shortages
marked the decades after Independence due to weak agriculture production. To increase production,
the Government of India (GoI) in 1969 established Rural Electrification Corporation (REC) to
promote grid-connected irrigation pump sets and bring in more area under irrigation. Then in 1974,
the Minimum Needs Program (MNP) was launched to enhance access to electricity services to rur al
areas. All subsequent programs since then had focused on universalizing access to electricity, like the
Kutir Jyoti Program (KJP). KJP, launched in 1988-89, aimed at improving the quality of life of the
1
poorest households through the provision of single-point connections .
During2 all this time till 1997, the definition of an electrified village was "A village should be classified
as electrified if electricity is being used within its revenue area for any purpose whatsoever." After
1997 and till 2004, the definition of an electrified village was enlarged to "A village is deemed to be
electrified if the electricity is used in the inhabited locality, within the revenue boundary of the village
for any purpose whatsoever." In 2000-01, GoI launched the Pradhan Mantri Gramodaya Yojana and
added a rural electrification component to it the next year. In 2003-04 the Accelerated Rural
Electrification Program was launched. The following year, this program was merged with the KJP to
form Accelerated Electrification of one lakh villages and one crore households. The merger brought
into focus the importance of 'household electrification.’
To deepen village electrification, GoI in 2004 e xpanded the definition of an electrified village and, in
2005, merged all ongoing schemes/programs to launch the Rajiv Gandhi Grameen Vidyutikaran
Yojana (RGGVY). Now, the village is considered electrified if:
(a) necessary infrastructure such as distribution transformers and distribution lines are
provided in the inhabited locality;
(b) electricity is provided to public places like schools, Panchayat office, health centers,
community centers;
(c) the number of households electrified should be at least 10% of the total number of households
in the village.
The focus of RGGVY was to create a backbone of rural electricity supply, however, at the risk of being
extensive (number of villages electrified) rather than intensive (% of households covered)3.
Interestingly, RGGVY had a component on Decentralized Distributed Generation (DDG) for remote
villages where grid connectivity was either not feasible or not cost-effective. All un-electrified
villages and hamlets having a population of more than 100 were eligible under the scheme, and
identification of eligible villages was to be done by the State Nodal Agencies (SNAs) in consultation
1
A brief history of rural electrification in India. https://www.engenuity.co.in/file/Rural%20electrification%20-%20a%
20brief%20history%20and%20context%20for%20the%20future.docx
2
Dakshinanchal Vidhyut Vitran Nigam Ltd:: DVVNL. https://dvvnl.org/RGGVY_def_electrified_village.aspx
3
Modi, Vijay, 2005. Improving Electricity Services in Rural India, CGSD Working Paper No.30, pp. 30
DEMAND GENERATION FOR SOLAR MINI-GRID First Edition | 11

with State utilities/Distribution companies (DISCOMs) and MNRE. The Ministry of Power, which has
always been anchoring rural electrification programs through Rural Electrification Company (REC),
and the Ministry of Renewable Energy (MNRE) jointly assumed responsibility of providing electricity
to remote hamlets/villages through Renewable Energy Technologies (RET). MNRE had also been
running Remote Village Electrification Program (RVEP) and Village Energy Security Program (VESP)
through the SNAs. In 2014, GoI launched the Deendayal Upadhyaya Gram Jyoti Yojana (DDUGJY),
which in addition to the rural electrification component of RGGVY, had additional components on the
separation of agriculture and non-agriculture feeder. It further strengthened/augmented
transmission and distribution infrastructure in rural areas. RGGVY was thus subsumed into
DDUGJY4.
While the country was on its course for 100% village electrification, which happed in April 2018, GoI
in September 2017 launched the Pradhan Mantri Sahaj Bijli Har Ghar Yojana (Saubhagya) targeting
5
100% household electrification of all interested households, estimated at 3 crore . To date, 99.99% of
all interested households have been electrified, and the remaining households will be pro vided with
basic electricity services shortly.
1.2
The Paradox of Demand-Supply Gap
Despite such significant strides in the universal village and household electrification, studies
consistently reflect that this more comprehensive electricity coverage, especially in rural areas, does
not automatically result in increased and sustained consumption of electricity resulting in
improvements in incomes and quality of life. The gap is a result of mismatches between
characteristics of demand and supply.
1.2.1
Supply-Side Issues
Rural electricity distribution is primarily the responsibility of the state-owned DISCOMs. They do not
prioritize the quality supply of power to rural areas primarily because of the following challenges:
• High capital investments: creating the necessary infrastructure of sub-stations and feeders
and providing connections to individual connections is a capital-intensive exercise that acts
as a deterrent for the DISCOMs.
• Higher losses: a large number of distributed loads increase the distribution losses for the
DISCOMs.
4
http://www.swaniti.com/wp-content/uploads/2017/07/DDUGJY-Brief_Schemes-Compendium.pdf
5
http://pib.nic.in/newsite/mbErel.aspx?relid=171148

• Lesser returns: typically, rural consumers have lesser paying capacities as compared to their
urban counterparts. This issue, coupled with lesser per capita consumption of electricity (at
least in the domestic category due to lesser use of electrical appliances), results in lesser
returns for the DISCOMs per unit of electricity supplied to a rural consumer as compared to
an urban one.
• Operational inefficiency: per unit cost of billing and collection for a rural consumer is
comparatively higher as compared to urban ones. Billing and collection in rural areas are not
economical without automation or computerization of electricity distribution. It should also
be noted that a significant component of this operational inefficiency of DISCOMs is hidden in
the 'pilferage' component of their financial statements.
• Higher pilferage: though this is not specifically a rural phenomenon, coupled with the above
issues, the theft of electricity in rural areas through by-passing of meters, hooking (katiya),
and bribing of DISCOM agents further aggravate the supply challenges.
Technological interventions like pre-paid metering, load limiters, use of armored cables, remote
monitoring can help address some of the abo ve challenges of pilferage, and operational inefficiency.
Institutional models like input-based franchisees have also been explored in different parts of the
country, though with mixed results, to address collection and operational issues. Also, government
programs like APDRP carry out the augmentation of distribution infrastructure. However, low
returns from investments have been a consistent challenge for the DISCOMs.
1.2.2
Demand-Side Issues
Rural consumers have comparatively much lesser demand for electricity as compared to their urban
counterparts, at least at the household level and excluding the energy consumed for irrigation water
pumping. The low demand is primarily due to:
• Lower ability to pay: rural households have much less per capita income as compared to
urban households, and thus the amount of disposable income is also lesser impacting their
ability to pay for electricity and electrical appliances. Also, incomes of rural households are
from a mix of livelihood options, the returns from which are not assured and in control,
thereby impacting their ability to pay for electricity and electrical appliances.
• Poor quality of supply: there is a muted demand for electricity services due to the poor
quality of supply characterized by frequent, unscheduled, and prolonged power cuts, voltage
fluctuations, and tail-end voltage drops.
• Lower willingness to pay: the above two reasons result in the lower willingness of villagers to
pay for electricity services.
• State focus on household electrification: in the 1990s, the State focused on pump-set
energization and village electrification for improving rural energy access. Since the last
couple of decades, the focus has primarily been on household electrification, with

commendable achievements. The provision of electricity services for micro industries and off-
farm based livelihood activities have never been the focus.
• Characteristics of rural markets: the availability of electrical appliances and their servicing
support is limited, resulting in unmet demands.
1.3
Emergence of Mini-Grids
Small local grids operating in parallel to the distribution network have been in vogue in urban and peri-
6
urban settings in energy deficit regions since decades . Diesel Genset (DG) operators selling power in
the evenings based on light, fan, and TV points in energy-deficient habitations were quite common in
the 1980s until the early 90s. With the improvement of the power supply scenario in the 1990s, these
local grids went out of business. However, the rural power supply scenario did not improve. Private
players came up in many rural areas to meet household electricity needs, especially through
7
renewable energy-based mini-grids in rural areas . Bad quality of grid supply, unavailability of supply,
fall in RET costs, knowhow on RETs and their implementation, support from donors, and
acknowledgment of the State on the difficulty (financial and technical) of extending the grid to remote
locations and non-remunerative loads have been the drivers for mini-grids 8. The poor financial
condition of the erstwhile State Electricity Boards (SEBs) and later the DISCOMs coupled with
increased levels of disposable income in villages and fulfilling the aspirational needs of the rural
population also contributed to the emergence of this sector.
6
Living with Load Shedding, Vol 15, Issue No. 24-25, Economic and Political Weekly, 14 June 1980
7
Bhattacharyya, S.C., 2012a. Energy Access programs and sustainable development: a critical review and analysis,
Energy for Sustainable Development, Energy for sustainable development, Volume 163, pp. 260-271
8
Tongia, Rahul. 2018. Microgrids in India: Myths, Misunderstandings, and the Need for Proper Accounting,
Brookings India, pp 5

1.4
What is a Mini-Grid?
Mini-grids are electricity distribution systems comprising generation sources (e.g., solar panels,
biogas plant), and a distribution network to deliver power to customers. A typical rural mini-grid
(figure 1.1) distribution network extends 1-2 km from the plant, allowing it to service 100-140
households, 50-60 shops, and a mix of productive users.
Remote Monitoring
Telecom Tower Institutions
Solar Power Plant
Commercial Load
Institutions
Households
Shops
Figure 1.1C : A typical solar mini-grid
1.4.1
Benefits and Constraints of Mini-Grids
Mini-grids provide capacity for both domestic appliances and local businesses and have the potential
to become the most potent technological approach for accelerated rural electrification. Mini-grids
also offer an optimal solution for utilizing localized renewable energy resources. Many locations offer
excellent natural conditions for the use of solar photovoltaic (PV), wind, or small hydropower. In
recent years, RETs have evolved dramatically in terms of prices, efficiency, and reliability. Today,
conservative calculations of life-cycle costs show that RE based mini-grids are usually the most
competitive technical solution .
9
https://www.ruralelec.org/sites/default/files/hybrid_mini-grids_for_rural_electrification_2014.pdf

Mini-grids have to demonstrate to existing and prospective electricity consumers that they offer
above mentioned tangible benefits over alternatives (possibly cheaper) energy sources such as
kerosene lamps, diesel generators, solar home systems, rechargeable batteries, and the government
grid. The drivers of customer satisfaction—and hence their willingness to pay for a mini-grid
connection—are described in Box 1, which constitutes the "customer service mantra" for mini-grid
developers10.
Box 1: Why customers choose mini-grids ?
• Quality and reliability of power : mini-grids must ensure dependable, uninterrupted

service, at a voltage sufficient to run customers' appliances
• Packages tailored to local needs: a variety of package options with a range of tariffs, load
levels, and timings satisfy customers that they are paying for what they need
• Responsive customer service: agents available to resolve technical problems, assist with
package changes, and spread information about promotions with high customer
engagement and perceptions of dependability
• Investment in the local community: ESCOs invest for supporting access of energy
efficient appliances for customers—both household and commercial.
Regarding the limitations of mini-grids, technical constraints of technologies like loads and their
usage patterns are a significant limitation. Also, per-unit rates of electricity are generally higher than
what the grid offers, which acts as a barrier for communities to pay for the services. Finally, mini-grids,
like other electricity initiatives in the power sector, have to function in the existing regulatory
framework, and this sometimes limits the extent of benefits that they can offer to communities.
1.5
Business Models for Mini-Grids
Business models of mini-grids vary according to their ownership, which also is dependent on existing
regulatory frameworks. In the context of rural electrification in India, DISCOMs, or entrepreneurs or
village institutions can own, manage, operate, or maintain the systems. Based on ownership, business
models11 could be:
10
http://www.smartpowerindia.org/Media/1140/MGH%20Hand%20Book_V3%2022%20Nov%20FInal%20Edited%
20For%20web%20use%201.pdf
11
https://www.usaid.gov/energy/mini-grids/ownership/models

1.5.1
Community-Based Business Model
In this model, local communities own, manage, operate, and maintain mini-grids through an
institution that they develop (figure 1.2). Such projects usually receive external funding and
assistance in design and installation. Once the mini-grid is installed, the community institution
collects tariffs and runs the project.
Community-based ownership models are standard in developing countries where private companies
and utilities lack the capacity or incentive to electrify remote communities. In remote rural areas,
where tariffs won't cover investment costs, community-based ownership may be the only option.
Donor Implementation partner/NGO
Grant Technical assistance
Government Community owned Minigrid Project developer/EPC

Subsidy
Installation &
commissioning
Ÿ Setting & collecting tariff

Ÿ Operation & running
Community
Figure 1.2: Simplified community-owned business model
1.5.2
Private Sector Based Business Model
In this model, a private investor pays to construct, operate, and maintain the mini-grid (figure 1.3).
Funding often comes from private equity and commercial loans. Involving the private sector in mini-
grid development can be challenging since small-scale, remote projects are not usually profitable.
Creative approaches, however, can make the mini-grid investment financially attractive.
Entrepreneurs use the anchor load approach, community clustering approach, and private-private
partnerships to implement successful projects.
Investor Donor
Grant
Debt/Equity
Implementation partner/NGO
Technical assistance
Government Entrepreneur owned Minigrid

Subsidy
Ÿ Design & installation
Ÿ setting & collecting tariffs
Community Anchor loads

Figure 1.3: Private sector based business model

1.5.3
DISCOM Based Business Model
DISCOMs can also own mini-grids in much the same way as their distribution network but on a smaller
scale (figure 1.4). In some such models, the DISCOM contracts with local firms to manage parts of the
12
project, say like billing and collection . DISCOM based mini-grid projects often use subsidies to keep
tariffs affordable in remote communities.
Utility owned Mini grid
Ÿ Installation &
commissioning
Ÿ Tariff setting
Ÿ Contracts operations &
running to ESCO
ESCO

Ÿ Billing & collection
Community
Figure 1.4: DISCOM based business model
1.5.4
Hybrid Business Model
Hybrid business models13 combine different aspects of the models given above. Different entities
could be involved in investment, ownership, and operation of a mini-grid. There is a division of labour
between the responsibilities of various actors involved in the mini-grids through joint ventures or
other contractual arrangements. The generation and distribution of electricity can be divided
between government companies, private firms or local communities in the form of small power
producers (SPPs) and small power distributors (SPDs). The success of these models is dependent on
the regulatory framework and clarity of property rights.
Examples of contractual arrangements that are a part of hybrid models are:
• Public-private partnerships: public sector could build, operate and manage the mini-grid with
the private firm responsible for maintaining the system
• Renewable energy service companies (RESCOs): assets are owned by the government and the
machinery is operated and maintained by RESCOs. They are also responsible for tariff collection.
12
Similar models called franchisee has mixed success in India.
13
https://e4sv.org/wp-content/uploads/2017/05/TR9.pdf

• Concessions: beneficial terms are given to the concessionaire to provide electricity to rural
areas. These terms could be in the form of geographic monopolies or preferential tariffs.
• Power purchase agreements: distribution and generation assets are owned and controlled by
different entities and a power purchase agreement is signed for providing electricity
Investor Donor
Debt/Equity Grant
MINI GRID
Community Entrepreneur DISCOM
Ÿ Design & installation

Ÿ Setting & collection tariffs
Community Anchor loads
Figure 1.5: Hybrid business model
1.6
The Need for Demand Generation
To be financially sustainable in the long run, the energy service companies (ESCOs) running the mini-
grids need to focus on meeting the village's existing power demand along with building additional
demand for power by supporting the development of local micro-enterprises. Such a strategy is a win-
win for both the ESCO and the community as the development of micro-enterprises translates into
the higher economic development of the village and increased demand for electricity from the mini-
grids resulting in higher revenues and profit.
The objective of this manual is to guide practitioners on how to generate demand, impacting the mini-
grid sustainability, supporting micro-enterprises, and the well-being of the rural community.

Points to remember
• REC was established in 1969 to promote grid connected irrigation pump sets and bring in
more area under irrigation
• Till date different initiatives were taken by the Government of India to deepen the grid
connectivity in the rural areas.
• Deen Dayal Upadhyaya Gram Jyoti Yojana (DDUGJY) was pivotal in achieving 100% rural
electrification while Pradhan Mantri Sahaj Bijli Har Ghar Yojana led to the 100%
household electrification.
• Despite achieving such a remarkable feat there remains supply side and demand side
issues.
• Some of the supply side issues are high capital investments, higher transmission losses,
lesser return, operational inefficiency, and high pilferage leading to loss making DISCOMS
• Demand side issues affecting electricity consumptions are lower ability to pa y combined
with low willingness to pay, poor quality of supply and state focus on household
electrification while neglecting micro-enterprise.
• The mismatch between demand and supply side has resulted in solar mini-grids
• Mini-grids are electricity distribution systems comprising generation sources (e.g., solar
panels, biogas plant), and a distribution network to deliver power to customers. A typical
rural mini-grid distribution network extends 1-2 km from the plant, allowing it to service
100-140 households, 50-60 shops, and a mix of productive users.
• There are various business models for mini-grid depending on ownership of the
generation and distribution – community-based business model, private sector-based
business model, DISCOM based business model, and hybrid business model.

2
DEMAND
GENERATION
STRATEGY FOR
MINI-GRIDS
2.1
Usage of Electricity in a Village
Electricity usage can be social and economic. Economic usage of electricity enhances incomes while
social usage improves the quality of life of the household. Use of electricity for income-generating
activities like running appliances or motor in shops and micro enterprises, water pumping for
irrigation are examples of economic usage of electricity (Figure 2.1). In contrast, electricity for
common usage resulting in better indoor air quality, better lighting, ventilation, and entertainment is
a social usage.
Often there is an overlap between the two, and it is a matter of valuation of the benefits that become
important in identifying impact of mini-grid. For example, adequate health, education, and drinking
water services need energy provision and are social usages, but their sub-optimal performance due to
lack of energy results in losses in productivity and hence the linkage with commercial usage.
Figure 2.1 : Examples of economic and social usage of electricity
Economic usages Social usages
Socio
Economic
usages
Ventilation Mobile
Irrigation Milling,
(fans) charging
pump grinding
Education
Drinking water
Lighting –
Running indoor & street Entertainment
motors Telecom Health
Tower
For demand generation, an ESCO needs to identify the electricity usage in a village where the mini-
grid will be set up and classify the usages into the above two categories to impute the value of
electricity services.
Post identification of electricity usage, the next step for the ESCO is the estimation of demand arising
from the use of various appliances and equipment. Studying the ‘motor specification details’ and
description of the appliances/equipment reveal their loads.

2.2
Segments of Rural Demand
and Usage Patterns
The ESCO also needs to identify the various segments of the demand that exists and that can be
developed in a village which will be catered to by the mini-grid. Broadly there are five customer
segments in a rural context. Table 2.1 shows the different customer segments and their average daily
load utilization and pattern of electricity consumption.
Table 2.1: Customer segments and usage patterns

Customer User Load Electricity Type of Challenges Opportunity
segment example (kW/ day) usage pattern load for ESCO for ESCO
Domestic Houses 0.1 – 0.3 Night Lighting, Not enough Meeting

fan, mobile device or immediate
Shops Small, large 0.1 – 0.3 Day charger, conventional demand,
or medium television device promoting
shops Energy
Efficient
Appliances
(EEAs)
Commercial Flour mill, 2–5 Day Motors, Manual; Introduction

Motors irrigation Refrigerators, not enough of motors,
(Industrial/ Machines enterprise finance,
agriculture) market
linkage
Institutional School, 1-4 Day Light, fan, Conventional EEA

bank, mobile device
ATMs, charger,
health center laptop,
printer
New Oil Expeller 10-15 Day Motor Not enough Introduction

Demand WTU and enterprise of motors,
Generation Flour Mill finance,
market
linkage
When we plot the loads as mentioned above of each segment (expressed in kW) against time intervals
on a graph, we get a Load Curve (figure 2.2). A load curve is useful to understand the distribution of
segment-wise and overall load over a twenty-four-hour period. The smoother this curve, i.e., with few
spikes, the easier it is for the ESCO to design its generating unit with minimum energy storage
resulting in lesser per unit generation cost and hence tariff for customers. In the case of solar-
powered mini-grids, the closer the load curve matches the solar generation curve, the more
manageable it is for the ESCO to service the loads, with lesser energy storage. Also, in the case of
spikes, the load curve provides the ESCO a basis to design packages for different customer segments.

Figure 2.2: A typical load curve of a mini-grid site
25
20
Unit consume
15
10
0
6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 0 1 2 3 4 5
Day hours
MEDs Households Shops Commercial Total
It should be kept in mind that load curves change over seasons, and the ESCO needs to develop them
for different seasons so that an appropriate strategy for servicing customers can be designed.
sting Demand
Ex i
nd
em a
Rev
eD
iew
ur
t
Fu
Figure 2.3: Cyclical nature of demand estimation
For each segment, the electricity demand changes over a time post setting up a mini-grid (figure 3).
The existing electricity demand changes with the introduction of Energy Efficient Appliances (EEAs),
efficient motors, and more opportunities in the form of new microenterprise development. Over
some time, the electricity consumption scenario may again change due to higher aspiration of the
customers or new usage of electricity by customers or the establishment of new enterprises or the
introduction of a new customer segment. Therefore, the ESCO should periodically revisit the
electricity demand for each of their mini-grid customer segments and conduct a review of the
electricity demand in a village using the Detailed Energy Survey (DES) Tool (discussed in chapter 3 in
detail). It improves the load acquisition by an ESCO and contributes to improving their revenue.

2.3
Demand Progression at Mini-Grid Site
Not all demand comes into the fold of a mini-grid at the outset but gradually increases when the
customers realize its benefits. Initially, the ESCO targets customer segments like domestic and
commercial establishments to meet their existing electricity demand of essential lighting,
entertainment, ventilation, and running a few small capacity appliances by providing reliable and
continuous electricity supply. Servicing existing load helps the ESCO in building trust with its
customers.
Figure 2.4: Demand progression at a mini-grid site
Financing and Market Linkage Support
Existing Load Future Load
75-80%
40-45%
30-35%
10-15%
Basic Lighting Conversion &

for households Expansion of Existing Introduction of New Demand Generation/
and shops Commercial Loads EEAs Micro Enterprise Development
Customer Engagement & Load Acquisition (CELA)
Month (0) Month (1) Month (3) Month (6)
Additionally, it helps the ESCO to increase electricity demand through the introduction of EEA and
efficient electric motors. Over some time, based on the economic potential of the area, the ESCO
initiates activities like microenterprise development to create new electricity demand opportunities.
The following figure sums up the demand progression. Once an ESCO understands the demand
progression, they can identify appropriate Customer Engagement and Load Acquisition (CELA)
activities like awareness campaign and financial support. In the initial stages, CELA activities are high,
but later its requirement tapers but never ends. It is a continuous process throughout the life cycle of a
mini-grid. The financial support is required to facilitate the adoption of newer and efficient
technologies which can substantially reduce the electricity consumption at the same or higher level of
output. In the long run, the benefits of these efficient technologies outrun the financial cost. To
increase the electricity demand, ESCO should undertake the development of new microenterprise,

which requires both financial and market linkage support. Figure 2.4 sums up the entire demand
progression at a mini-grid site along with CELA activities and the requirement of financial and market
linkage support.
2.4
Demand Generation Strategy
Based on the demand from different users, the ESCO prefers the demand curve to overlap as much as
possible with the solar generation curve to minimize the energy storage (battery) capacity, which is a
substantial (and generally the most expensive) component of the system. In this context, the
generation of appropriate demand that provides additional revenues to the ESCO against its capital
investments is crucial, and hence the need for a Demand Generation Strategy.
Figure 2.5: Demand generation strategy
Buyers Journey Demand Generation Process
Answer and Provoke Questions
Unaware Establish Trust

Inroduce Positioning
Lead Generated
Awareness Stage
(Qualified Leads) Educate or explain your point of view
Address “Imapact” questions
Consideration Stage
Educate on the solution
(Marketing
answer common questions
Qualified Leads)
Address barriers
Decision Handoff to sales

Stage
Contact
with Load Acquisition team
Demand generation strategy is a means to make aware potential customers about the mini-grid and
related product leading to Load Acquisition (LA), thus, driving revenue. We can simply say that
demand generation strategy links sales with revenue, which typically follows a buyer's journey from
14
being unaware to becoming a customer or champion of a product, as described in Figure 2.5 .
14
The model is adopted from a blog written by Doug Davidoff titled "The Difference Between Demand Generation & Lead
Generation" and available at https://blog.imaginellc.com/demand-generation-vs-lead-generation and sourced on
15th September 2019.

The potential customer in an area might not be aware of the benefits of the mini-grid or related
products. Also, the ESCO cannot convert all leads into sales at the very outset of the project. A village
has different customer segments, each with its demand characteristics, which need to be assessed by
the ESCO to develop its demand generation strategy. Communication is the key to making a demand
generation strategy effective, and interventions like advertisements, awareness programs, groups,
and one to one meeting may be employed.
Customers can be grouped based on their adoption of the mini-grid services as:
• Early adopters - who adopt the mini-grid or related products immediately
• Reluctant adopters - who are aware but are hesitant to adopt the mini-grid
• Non-Adopters - who do not see any benefit from the mini-grid and hence do not participate
The ESCO should have a different demand generation strategy for each set of customers. The early
adopters readily participate, and the immediate benefits of the mini-grid are apparent to them. The
benefits, however, need to be communicated to the reluctant adopters. Table 2.2 provides an
indicative list of benefits vis-à-vis other competing technologies that may be communicated to the
reluctant and non-adopters.
Table 2.2: Comparing of mini-grid over other available sources of electricity

Solar home lighting
Parameter Mini-grid Grid Diesel generator
systems (SHLS)
Cost of electricity High due to high Medium Low due to Very high due to
CAPEX economies of increasing cost
scale and sector of diesel
structure
Reliability High Medium. Faults Low with frequent The medium as

need to be locally outages long-running is
rectified difficult
Quality of supply High Average Low, tail-end Medium, tail-end

voltage drops problems
Pollution Low Low At generation Very high

point
Social Benefit High High Average Low

2.5
Designing an Effective
Communication Strategy
Communication plays a dominant role in shaping demand - addressing barriers, communicating
benefits, and acquiring consumers – for mini-grids. In recent years effective communication has
evolved from sporadic awareness-raising information, education, and communication (IEC) activities
to strategic, evidence-based behavior change communication (BCC) strategies. The change has come
about with the realization that as socio-cultural and gender norms influence individual behavior, the
need to mobilize communities in support of recommended behaviors is imperative, along with
integrating advocacy at the policy level.
For mini-grid projects, the ESCO needs to design a communication str ategy that targets individuals,
households, and the community separately so that behavior changes can be stimulated. The strategy
should also keep in consideration that as one goes up from the individual to the community, the
messages should be reinforcing in nature.
The overall framework for the communication strategy is represented in figure 2.6 .
Figure 2.6: Behavioral change communication framework and objectives
Communication objectives
• Impact Government policies & programmes

• Creating an enabling environment for
mini-grids
SOCIAL &
STRUCTURAL • Collective/village level benefits & values
• Village socio-economic development
• Leadership
COMMUNITY • Increase in social capital
FAMILY
• Change behaviuor through spousal influence
• Positive impacts on family quality of life
• Benefits and values
INDIVIDUAL
• Peer influences
• Raise awareness on benefits & negative

impacts on current usages
• Build knowledge
• Impact on emotions

At the level of the individual, the communication strategy may focus on increasing the level of
awareness of individuals on the negative impacts of the current energy usage patterns on both the
economic and social aspects and the benefits of adoption of mini-grids and how the negative impacts
can be addressed. Lack of knowledge of mini-grids and the opportunities that they offer is one of the
primary reasons for lack of participation of communities, and the ESCO needs to focus on building this
knowledge-based of the community.
At the family level, the communication strategy should focus on trying to change the behavior of
families by using spousal influence. It should build an understanding of families on the benefits and
values that they can realize by adopting mini-grids and the positive impact that such adoption can
have on the quality of life of the family members. At this level, peer influence – a neighbor having
adopted – can have a significant role in the change in behavior of the target family.
At the community or village level, the overall socio-economic development contributions of mini-
grids may be communicated and how the village can play a leadership role in their area. Successful
mini-grids can build the social capital of the community that can be tapped for other development
interventions, and this should be kept in mind by the ESCO.
Communication at the social and structural level focuses on creating an enabling environment for
large scale adoption of mini-grids and working with governments and donors to impact policies and
programs to that effect positively. A policy advocacy team or agency may best lead communication
targeted at this with evidence-based inputs from the ESCOs.
Specific points of communication for consumers at various stages of the Demand Progression are
detailed out in the relevant subsequent sections.
Points to remember
• Understanding different energy usages: it is important to assess different energy usages

to monetize supply for usages
• Demand patterns guide customer acquisition strategy: sub-segmentation of demand

forms the base for arriving at an acquisition strategy and designing packages. ESCOs must
invest focused effort to understand these demand patterns
• Understanding customer journeys: mini-grid customer needs are not static; they change
over time. The demand generation process should be flexible enough to meet these
changing needs over time. Thus, mini-grid practitioners should develop close relationships
with their customers and be a part of their journey
• Communication of benefits: different levels of service generate different benefits;

sometimes, these benefits are intangible ( improvement in the quality of life, convenience);
in other cases, they are tangible (increase in production and productivity, increase in
profits). Identifying these benefits for each sub-segment and communicating the same to
potential customers forms the essence of a Demand Generation Strategy.

3
SITE
SELECTION
3.1
Site Selection Framework
Site selection is a precursor to the building of a mini-grid and demand generation activities. A robust
site selection framework should be able to estimate the potential demand of the village as well as
provide inputs to the demand generation strategy.
The critical factor for the success of any solar mini-grid is its reliability in meeting consumer demand
cost-effectively. At the core of the framework (figure 3.1) is the generation of electricity demand to
ensure that the mini-grid is sustainable, scalable, and attractive for an ESCO.
Sustainability
• Breakeven
• Pay back period
• Hidden cost
Energy
Demand Attractiveness
• Energy consumption
Scalability • Day light energy
• Current market size co-efficient
• Growth potential Site Selection • Consistency in
demand
Figure 3.1: Site selection framework
• Scalability: the site selected for mini-grid installation should have sufficient electricity
demand nearby.
• Attractiveness: a good site should have high electricity generation potential, sufficient day
time demand, and the paying capacity of the consumers.
• Sustainability: mini-grid is a capital-intensive business. Targeting shorter payback leads to

higher consumer tariff making mini-grid less attractive to the consumers. However, a more
extended payback period increases the risk of the mini-grid. A suitable site should ha ve long
term potential.

3.2
The Site Selection Process for
Demand Generation Strategy
The site selection process has been developed based on the site selection framework. The process for
comprises of five key steps (figure 3.2):
Figure 3.2: Site selection process
Site Detailed Assessment

Load Load curve
Steps profiling electricity of enterprise
Assessment study
survey survey opportunity
Site profiling Detailed survey Load 24 hour load Assessment

results in short results to assessment for study to of enterprise
Task listing of states, estimate demand each segment estimate basic opportunities
districts and potential of the to understand configuration for potential
villages/ village/cluster demand pattern of generation future upscale
clusters unit demand
Primary and Primary Inputs from Inputs from Inputs from

Data secondary research detailed load detailed
source research electricity assessment electricity
survey survey
3.2.1
Site Profiling Survey
Site profiling is done to identify tentative energy-deficient villages and clusters with paying capacity.
It is done through secondary research and interviews with local stakeholders like government
officials and grassroots level organizations. Table 3.1 lists down indicative parameters for site
profiling.
Table 3.1: Indicative parameters for site profiling
Focus Area Parameters Remarks
Electrification • Electrification status • A village, suitable for mini-grid

Status - Grid-connected or Off-grid deployment, should be energy deficit, with a
a.If electrified, grid availability supply of grid electricity of fewer than 8 hours
duration and timings in a day and less than 2 hours from 5 pm to 10 pm
• % of customers • % of customers having a grid connection
having a grid connection should be few
• Quality and • Low quality and reliability of electricity
reliability of electricity supply from the grid

Focus Area Parameters Remarks
Electrification • Degree of use of alternate • Availability and use of alternate

Status sources for electrification electricity sources should be carefully analyzed
e.g., dependence on kerosene, • Electrification information can be
presence of standalone solar obtained from the power department, regulator
home systems and telecom operators
In case of the site has a telecom tower, the electricity supply data can be obtained from the
tower operator. Preferably, electricity data of the past one year should be used for analysis to
understand seasonality, political environment, etc.
In case the site has no telecom tower, the information as mentioned above may be obtained
from state electricity department/ villages (on best possible estimate)
Demographics • No. of households, population, • A higher number of households improves the

population density, and viability of mini-grids.
population growth • High population density and growth are
preferable
• Individual hamlets should have high population
density and are at proximity to each other
Solar potential • High solar irradiation and low • A higher number of sunny days improve
number of rainy days generation from the solar PV plant
• Biomass availability • Biomass-based generation technology can be
deployed as a back up to the solar reducing need
for energy storage
Paying capacity • Source of income; occupation; • Paying capacity is critical to understand the
of customers the presence of enterprises; profitability of mini-grid and as well as design
the level of industrialization; suitable service packages
the presence of a DG operator • Higher non-agriculture economic activity is a
good indicator for higher income level and
demand for electricity
Status of 'Rural' • State of 'Rural' notification • Mini-grids are safeguarded in rural areas from
notification of the village extension and strengthening of central grids
in India
Presence of • Status of the presence of any • An anchor load within 1 to 2 km distance from
anchor load anchor load such as telecom village increases the viability of a mini-grid
tower. operation
Clustering • The selected sites should be • Clustering helps in sharing fixed overheads like
potential analyzed for potential a manager, accountant, engineer, etc. among
clustering opportunities. several mini-grids thus reducing cost per
mini-grid
• The grouping is driven by the distance between
villages and distribution of load. Typically, 6 to
10 villages within 30 to 40 km radius can be
clustered for mini-grid development.
The above parameters are indicative, and ESCOs may develop their own set of parameters depending
on their requirements and business model.

3.2.2
Detailed Electricity Survey
Detailed Electricity Survey (DES) is an extensive on-ground survey to validate desk research
information and obtain additional information required for estimating the economic viability of the
mini-grid (Box 1). The objective of this step is to assess the existing as well as future demand potential,
time of day usage, and seasonality of demand.
Box 1: About DES Tool
The DES tool helps in capturing information to generate village energy usage profiles for a
variety of purposes, like identifying an appropriate location for setting up of a mini-grid or
assessing the electricity demand of the site. Information required for the DES tool is gathered
through door-to-door surveys, focused group discussions, selected influential person's
interview. DES Tool is a detailed questionnaire designed to capture:
• General information of the village: general information of a village helps understand the
availability of necessary infrastructure available, demographics, and economic activity of
a village/cluster. Public information includes the name of the village, panchayat, block, co-
ordinates, infrastructure available, number of households, and income range.
• Mapping of a village: mapping of a village helps in identifying village clusters, the distance
between them (aerial and road distance), and location with a high household density as
well as enterprise. A map should clearly show the aerial as well as road distance between
different clusters/villages or significant loads like telecom towers (figure 3). GIS tools may
be used for mapping.
• Load Mix: This helps understand the existing demand from different customer segments
within a village. It captures information related to the number of various appliances used
and their usage in detail.
• Electricity supply information: electricity supply information help in estimating the gaps
in electricity supply and should capture a current level of electrification, reliability, and
timing of supply an alternate source of electricity lik e solar home systems, kerosene, and
diesel generators.
The tool should be as detailed as possible to capture the variations during day and night
demand as well as the seasonality.
The existing demand is usually from households, shops, and existing enterprises or institutions.
Future demand potential is from the addition of appliances b y existing consumers or the addition of
new enterprises. ESCO would need to develop a DES tool to carry out the exercise.
DES involves gathering a large number of data points from all households, shops, and other
establishments in a village. Collecting such extensive data has a high chance of errors, which can lead
to inadequate design of the mini-grid system leading to its failure. Thus, ESCOs should engage highly

specialized agencies for carrying out DES and should review the survey for any errors, missing
information, biased opinions.
Figure 3.3: Snapshot of DES of a hamlet
3.2.3
Load Assessment for
Different Customer Segments
Through DES, ESCO has complete information on the number of consumers under each segment, kind
of appliances currently used, existing infrastructure, clusters/ hamlets, electrification status, quality
and reliability of electricity supply, and paying capacity of potential customers (figure 3.3). Based on
this information, the daily electricity demand for each segment can be assessed. The ESCO can also
calculate the size of the solar generation unit and its possible capacity utilization from this study. High
capacity utilization is desired as it is directly proportional to the mini-grids revenue and hence its
sustainability. A sample load assessment for three villages is shown below in table 3.2. The analysis of
table 3.2 clearly shows that village C is best suited for the location of solar mini-grid as it has the
highest existing load as well as the future load. Also, the majority of the load is day time load.

Table 3.2: Sample Load Assessment
Villages/Clusters
Demand Load
Type Type
A B C
No. of Cumulative Time of No. of Cumulative Time of No. of Cumulative Time of
units Load Usage/ day usage units Load Usage/ day usage units Load Usage/ day usage
Day (KW) Day (KW) Day (KW)
Households/
100 10 Night 200 20 Night 250 25 Night
shops
Existing Institutional 3 1.5 Day 5 2.5 Day 7 3.5 Day
Commercial
8 8 Day 10 10 Day 12 12 Day
Loads
Total Existing Load 19.5 32.5 41.5

Households/
shops 100 15 Day/Night 200 30 Day/Night 250 37.5 Day/Night
Institutional 3 3 Day 5 5 Day 7 7 Day

Future
Commercial
8 12 Day 10 15 Day 12 18 Day
Loads
New Demand
3 30 Day 3 30 Day 3 30 Day
Generation
Estimated Future Load 60 80 92.5
3.2.4
Load Curve Study
For solar mini-grids lowest generation cost is achieved when demand pattern matches that of the
generation profile. However, in reality, this is never the case. An analysis of the load curves of each
customer segment as well as the cumulative load curve, juxtaposing them with the generation curve,
and calculating the energy generated and demanded helps the ESCO to arrive at the energy storage
capacity. Also, such an analysis enables the ESCO to 'manage' the load curves by trying to shift
demands by playing with tariffs.
3.2.4.1
Day-Night Variation
The flatter the demand curve, the easier it is for the ESCO to set up capacity and service loads.
However, the demand for electricity in a village is not constant throughout the da y. Commercial and
micro-enterprise loads are generally in the day time, and household loads come up in the night. For
solar mini-grids, the challenge is compounded due to the nature of the generation curve, making
energy storage compulsory, thus raising the cost of electricity as energy storage typically is the most
expensive component of a mini-grid. This day-night variation has to be kept in mind by the ESCO in
designing the mini-grid.

3.2.4.2
Seasonal Variation
Seasonal variation is an essential factor that needs to be factored while analyzing demand. Demands
for electricity vary across seasons in a y ear due to the difference in usage of appliances, agricultur al
pump sets, and economic activities. Usually, the demand for electricity is significantly reduced during
the winter season in rural areas – for households and shops, it is due to decreased usage of appliances
like fans and refrigerators, and in the case of agriculture, it is due to less irrigation. Similarly, enterprise
activities like oil expeller, water treatment unit, bulk milk chiller, etc. also show significant variation in
demand over seasons.
3.2.5
Assessing Opportunities for
New Demand Generation
While conducting DES, ESCO should analyze data to arrive at future opportunities of new demand
through micro-enterprise work. Micro-enterprises have following advantages for mini-grids:
a) Micro-enterprises generally use heavy motors (>2 hp) which require three-phase electricity
and can potentially contribute about 70% to 80% of the total load
b) As the demand from enterprises is usually during the daytime need for energy storage is lower
This assessment, as a part of the site selection process, helps ESCOs in deciding on the actual size of
the mini-grid and also prepare for the future scale-up opportunity. Based on the characteristics of the
site, potential micro-enterprises can be identified. Data requirements for assessing the potential
need to be identified and integrated with the DES tool and data need to be collected through DES.
Following are a few pointers for potential micro-enterprise development:
• Demand for processed products in surrounding areas for which raw material is commonly
grown in the identified village. Processing can be done at the village from the crop produced
and sold in the nearby markets, e.g., mustard, a commonly grown crop in northern parts of
India, can be used for producing mustard oil consumed across northern and eastern parts of
India.
• Small and micro-enterprises commonly present in nearby areas. Such new demand
generation or micro-enterprises can be developed within the mini grid catchment.
Identification and analysis of new demand generation are discussed in Chapter 7.

Points to remember
• Scalability, attractiveness, and sustainability: chosen sites should be such that they
offer sufficient electricity demand within proximity, high electricity generation potential,
sufficient day time demand, and high paying capacity of consumers, with shorter payback
periods for investments.
• Importance of DES: designing of the system capacity depends on the DES, and the ESCO
should undertake this exercise with utmost diligence. In-depth understanding of
customer segments, segment-wise demand, demand curves for each segment, and
generation curve from solar at the particular site forms the basis for designing the mini-
grid.
• Understanding existing micro-enterprises: micro-enterprises generate more revenue

per unit of electricity (and hence surplus/profits) for the ESCO; serving these micro-
enterprises contributes to the financial viability of a mini-grid.
• Understanding local livelihoods: post-arrival of the mini-grid, other micro-enterprises

can come up depending on the livelihoods of the village. Thus, ESCO needs to understand
the livelihood pattern at the selected site so that it can develop new micro-enterprises
that uses electricity from the mini-grid, ensuring mini-grid financial viability and also
contributing to the socio-economic development of the village.

4
DEMAND
GENERATION
FOR EXISTING
LOADS
4.1
Background
Existing energy users meet their needs from sources like kerosene, solar home systems, diesel
generator sets, and government grid. The electric appliances used by existing energy users are
defined as existing loads. Most of the households, shops, commercial establishments, and institutions
can be classified as an existing load (figure 4.1). A significant consumption is from lighting, fans, and
mobile charging. Well-to-do households and bigger shops may use other electric appliances like
television, computers, refrigerator, mixer grinders, and geysers. Meeting energy needs of existing
loads are for two customer segments: (a) households and (b) shops. The types of loads are typically
lighting, fans, TV, and mobile charging. Targeting the existing load is an entry point activity for the
ESCO and can be done quickly. Tapping these loads is essential because of the following reasons:
Figure 4.1: Demand progression
75-80%
40-45%
30-35%
10-15%

• The customers of these loads suffer due to the quality of supply, and hence the prompt
resolution of their energy problem and service can build the trust of the ESCO and the mini-
grid in the village
• Meeting these loads are the easiest as convincing the customers of the financial benefits of the
mini-grid is not required as the benefits that these customers realize are intangible one –
convenience, quality of life, positive effects on education, indoor air quality, etc.

However, it should be kept in mind that for this category of customer, quality of service is paramount.
Consumers with essential electricity requirements, i.e., for lighting, fans, and mobile charging, are
usually the first movers to mini-grids. Consumers with large loads like motors and large loads with
steady demand like telecom towers often adopt mini-grids after demonstration of the reliability of
services. This section covers the demand and acquisition of early movers.
4.2
Identifying Potential Customers
There is a positive correlation between income and energy consumption of households. Progressing
from the customer segmentation outlined in Chapter 3, at this stage, the ESCO needs to further
segment the customers for a deeper understanding of their energy needs. Each of the consumer
segments can be further sub-segmented into:
1. Households – Small, medium and large based on their income

2. Shops - Small, medium and large based on their turnover
3. Commercial establishment – Small, medium and large based on their turnover
4. Institutions – Small and large based on number of employees
5. Anchor –Telecom tower or new demand generation (micro-enterprises)
Detailed load and demand pattern analysis of the sub-segments helps the ESCO in designing and
pricing packages so that they meet the requirements and is affordable for the particular sub-
segments. Different pricing for different segments helps ESCO to increase the customer base.
An unreliable or limited supply of energy and a lack of reliable and affordable alternatives make
households and shops the early movers. Other consumers usually rely on diesel generators for
meeting their demand and often adopt mini-grids after the demonstration of the reliability of supply.
Though the electricity demand of households and shops is lower in comparison to others, they help in
kick-starting and providing revenue for a mini-grid in the short term.
4.3
Load Acquisition (LA) for Mini-Grid
An ESCO needs to identify customer segments while approaching them, and the best-suited strategy
should be adopted to bring them in their fold. To acquire existing loads, the ESCO needs to understand
consumer behaviors vis-à-vis their level of income, which can be explained through the concept of
'Energy Ladder.'

4.3.1
The Concept of the Energy Ladder
The behavior of customers depends on where they are in the 'energy ladder.' The energy ladder theory
(figure 4.2) posits that in response to higher income and other factors, households shifts from
traditional biomass and other solid fuels to more modern and efficient cooking fuels such as LPG,
kerosene, natural gas, or even electricity. This process is usually termed 'fuel-switching' or 'inter-fuel
substitution’14. In the case of mini-grids, load acquisition b y the ESCO also follows the energy ladder
concept, as illustrated in the following figure.
Work
nd
Dema
eased
Incr Installation of
EEA machines to
generate
income
With introduction
Basic Usage + of Energy efficient
Appliances devices like
electric cooking
stove, CFL, motor
Some of the bigger
Basic Usage based appliances,
household/shops
water pump
may use it to run
electricity
appliances like fan
demand also
Lighting and mobile apart from basic
increases
charge is the most usage
basic requirement
of household and
shops.
Income Level
Figure 4.2: Progression of mini-grid customers on the Energy Ladder
Once reliable and consistent electricity is available, people's aspiration increases, and accordingly,
the consumption of electricity also increases. In the long run, this means that electricity demand
increases over time in the same population, which means that there is the opportunity for the ESCO to
introduce EEA and other non-lighting appliances like television, mixer grinder, etc. Access to finance
helps speed up this process when they can purchase devices and equipment they aspire. Moreover,
there is an opportunity to add new economic activities at the household level due to the availability of
electricity. Different consumers are at different levels of the electricity ladder, and with an increase in
income, move up the ladder, thus increasing the consumption of electricity produced.
14
Barnes, Douglas F., and Uu Qian. 1992. “Urban Interfuel Substitution, Energy Use, and Equity in Developing Countries."
World Bank Industry and Energy Department Working Paper, Energy Series Paper 53, Washington, DC.Hosier, R, and
W. Kipondya. 1993. "Urban household energy use in Tanzania: prices, substitutes, and poverty." Energy Policy 21: 453-
73 MayLeach, Gerald. 1992. “The energy transition” Energy Policy, February: 116-123.

4.3.2
Communication for Meeting Existing Loads
After understanding the position of different consumers in the energy ladder, the ESCO needs to
execute its communication strategy as developed through the framework outlined in Chapter 2. A
possible plan for creating awareness among different types of customer segments need to be
designed as per the level of awareness level of the target segments is provided in table 4.1.
Table 4.1: Strategies vis-a-vis customers' awareness

Awareness Level Connection Status Proposed Strategy
High - medium Existing customer Need to continue sharing benefits and sell deeper i.e., move
them up the electricity ladder
High – medium Not existing Need to communicate benefits and convert the customers
customer actively; also understand the rationale for not taking the
solar mini-grid electricity
Low – unaware Not existing Need to provide necessary awareness, communicate benefits
customer and convert customers
A well-designed strategy for these consumers should consider their beha vior, awareness levels, and
suitable awareness channels. The strategy should include:
1. Message to be delivered to potential customers
2. Partners to deliver the message
3. Communication channels to deliver the message to the potential customers
4.3.2.1
Message to be Delivered to Potential Customers
The social and economic benefits of the mini-grid need to be communicated to potential customers.
Also, the benefits need to be compared with their current sources of energy, helping potential
customers quicken the process of decision making (table 4.2).
Table 4.2: Benefits of Mini-Grid over other available sources of electricity
Services • Reliable supply of electricity for lighting, fan and mobile charging
Comparison • Provides better light vis-a-vis kerosene lamps

• Provides a more reliable supply of power compared to the central grid
• Flexible services and multiple service packages to select from
Economic Benefit • Extended productive hours

• Start new economic activities at home due to extended productive hours
Social Benefit • Access to lighting means more time for the children to study
• Enhanced safety and security

4.3.2.2
Partners for Delivering the Message
To effectively deliver the message, it needs to be achieved through stakeholders thoroughly
embedded in the community. Some of these stakeholders are:
• Forming local partnerships with local NGOs: many NGOs are engaged with rural
communities to implement various social projects at the grass-root level. These NGOs have a
good rapport with the local community and can help the ESCO in getting introduced to the
communities, which is vital for making inroads in the market. They can help in creating
awareness and also last mile load distribution.
• Local influencers: local influencers act as a link between ESCO and the community. They
create a conducive environment for a social meeting for running a campaign. The local
influencers can be a teacher, health worker, social worker, village head, or even an existing
customer. They are persuasive in their approach and can help the ESCO is customer
acquisition.
• Other stakeholders: there are several service providers visiting villages like roving
merchants. These service providers can be used to spearhead the campaign by meeting the
local community or distributing pamphlets or doing a small survey for the ESCO. They can
provide information to the ESCO related to the economic activities in a village, household
density, route planning, etc.
4.3.2.3
Communication Channels
The ESCO should devise its communication strategy to bring them into their fold to increase the
customer base. A sustained campaign should be designed to create awareness, increase adoption, and
engage with the community for the approval of solar mini-grid. Possible communication channels that
the ESCO can explore are shown in figure 4.3.
Figure 4.3: Communication channels for customer messaging
Individual Family
• Door step meeting • Group discussion

• One-to-one meetings • Community level awareness generation
• Use local partner organisation • Use peer cross learning

Points to remember
While engaging with customer segment with existing load, one should remember:
• Gaining of trust: for a mini-grid to be successful, the ESCO needs to build the trust of the
community, and meeting the energy problems of the early adopters can build that trust.
• Knowledge about the problem: it is crucial to assess the existing pain points of the
community and its willingness to adopt a change
• Belief in the importance of the problem: besides understanding the real pain points and
needs of the community, the community itself must realize the necessity of reliable
electricity. Moreover, they should be proactive in wanting to find solutions and overcome
challenges to fulfill this need
• Desire to change: the willingness to adopt the change is as essential as being aware of
one's needs
• Belief in one's ability to change: it is vital to make the community realize its own ability to
adapt the change and see the desired outcome
• Ability to take action: after understanding the need and showing a willingness to be part
of the initiative to bring about the desired change, it is essential to make them know how to
go ahead and take relevant action

5
CONVERSION
AND
EXPANSION
5.1
Background
The earlier chapter discussed the demand generation strategy for existing consumers. This chapter
deals with the increasing demand through the adoption and expansion of existing commercial motors
(figure 5.1). In rural areas, micro-enterprise like flour mill, oil expeller, small dairies, and farmers use
commercial motors. High energy costs limit micro-enterprises from expanding their operations
because:
1. It makes their products/services less competitive to products/services imported from outside

of the village
2. It increases the cost of production requiring more capital outlay of the entrepreneur/ owner
75-80%
40-45%
30-35%
10-15%


5.2
Importance of Commercial Motors
for a Mini-Grid Site
Commercial motor loads have the following advantages:
1. They are usually during day time and would require less or no battery backup.
2. They are larger loads compared to household and shop loads. The addition of motor loads can
improve capacity utilization.
Due to the above two reasons, the addition of these loads reduces the average cost of electricity and
makes it more attractive for the customers.
Existing commercial motors are generally single-phase motors or are powered by diesel engines.
They are inefficient, leading to high energy costs and generate local air and noise pollution. Lack of a
reliable supply of electricity is one of the primary reasons for using these motors.
Ensuring a reliable supply of electricity can enable the usage of efficient commercial motors. Using
efficient motors reduces energy consumption and pollution. However, the high upfront costs of such
commercial motors act as a barrier for micro-enterprises and farmers in adoption. ESCOs can play an
essential role in enabling micro-enterprises to deploy efficient motors by:
• Providing a reliable supply of electricity
• Promotion and facilitation of adoption.
5.3
Defining Conversion and Expansion
To gain from the improved supply, existing motors, i.e., single-phase and diesel engine based, need to
be replaced with three-phase motors. Since the current motors need to be replaced with efficient
three-phase motors, the inclusion of these loads into mini-grids is referred to as 'conversion.' With
improved supply, micro-enterprises can deploy additional machinery to expand their business and
enhance their income regarded; this is regarded as ‘expansion.’
Conversion and expansion require the purchase of new machinery. Micro-enterprises and farmers
may have limited technical and financial capacity to invest in new machinery. ESCOs addressing
limited capacity can potentially lead to the addition of loads to mini-grids improving the capacity
utilization of the mini-grids.

5.4
Segmentation
Commercial motors loads can be segmented on their power rating, as shown in table 5.1.
Table 5.1: Showing segmentation of commercial motors

Segments Definition Example
Commercial appliance-based Commercial appliance-based Photocopy machine,

customers loads <1kW photo studio, etc.
Commercial motor -based Commercial motor-based Refrigerators, irrigation pumps,

customers loads >1kW flour mill, oil expeller, etc.
Though small in number, commercial motor based customers have the potential to create a high
demand for a mini-grid, for example, the addition of a flour mill and an oil expeller can add substantial
loads of up to five times or more as compared to commercial appliance-based customers. By adding
more commercial motor based customers, ESCOs would need a lesser number of other consumers.
5.5
Customer Acquisition Strategy
The ESCO has to put in the effort to acquire commercial loads and convince clients to go either for
conversion or expansion. The staff of ESCO should visit each microenterprise and farmer and inform
them about the benefit of the mini-grid and how it can transform their business by reducing cost and
enhancing income. The first category of customers comprises of clients who are aware of the benefits
and easily participate in the mini-grid and go for conversion/ expansion. The second category includes
customers who are aware of the benefits, but they do not have enough finances for conversion/
expansion. The third category is of customers who are not aware of the benefits of mini-grids and
conversion/ expansion. The customer acquisition strategy that can be adopted is as follows:
• For the first and third categories of customers, ESCOs need to run awareness campaigns,
though the messaging has to be different.
• The second set of customers, in addition to awareness campaigns, requires financial support
for conversion/ expansion. ESCOs can explore partnerships with MFIs and banks for meeting
the financing needs.

5.6
Importance of Financing
The conversion of existing motors with efficient motors or expanding the current capacity of a micro-
enterprise using motors requires upfront investments, which is a challenge for micro-enterprise
owners or farmers. Therefore, providing financing facilities to such customers increases the adoption
of conversion and expansion strategy. The ESCO can arrange finance in the following ways:
• Provide efficient motors and building its cost in the package
• Partnership with microfinance institutions (MFIs) or other lending agencies to make credit
available to the micro-enterprise owners and farmers to purchase efficient motors.
Points to remember
While engaging with customer segment with commercial motor load, one should remember:
• Smoothens demand curve: conversion of existing inefficient motors and diesel engines
give ESCOs loads that overlap with solar generation and hence smoothens the load curve.
• Clean energy use: replacing diesel engines not only reduces energy costs of micro-
enterprises but reduces local air pollution.
• Communication of benefits: the thrust of the ESCO should be to convey the financial
benefits of conversion to the micro-enterprises. Improvement in working conditions is
another benefit that needs to be communicated.
• Addressing financing needs: high upfront costs of efficient motors act as a barrier to
adoption, and the ESCO may enter into partnerships with MFIs and banks for financing
these.

6
DEMAND
ENHANCEMENT
THROUGH
ENERGY EFFICIENT
APPLIANCES
6.1
Background
The targeting of basic lighting and conversion and expansion of commercial motors helps ESCO to
achieve 30%-35% of the targeted load to make the solar mini-grid sustainable. An additional 5%-10%
increase in utilization can be achieved through energy-efficient appliances (figure 6.1). Meeting the
energy needs of such appliances can contribute up to 40 to 45% of the total demand for electricity of
the mini-grid and hence is quite essential. The introduction of energy-efficient appliances (EEAs)
creates numerous additional benefits for both the consumers as well the ESCO, and this is detailed in
subsequent sections.
75-80%
40-45%
30-35%
10-15%

6.2
What are Energy Efficient Appliances?
Energy-efficient appliances (EEAs) are designed to utilize minimum energy to complete the required
task. Small and medium households, shops and commercial establishments have low demand for

electricity due to limited paying capacity. EEAs help increases the demand for electricity affordably .
EEAs consume considerably less energy as compared to the appliances that they replace and help
consumers to use more appliances with the same amount of energy (figure 6.2).
Figure 6.2: Savings in electricity usage using EEAs
Wattage (W) 40 7 75 45 150 45
Savings (W) 33 30 105
6.3
Economics of EEA
It is imperative to understand the economics of EEAs to design the promotion strategy, be it
generating awareness, developing new packages, or tying up MFIs. To understand the economics, let
us take an example of a commonly used incandescent bulb of 40 W and 7 W LED bulb with similar
lumen outputs.
Table 6.1: Savings in energy bill using EEAs
Parameter 60 W incandescent bulb 7 W LED bulb
Electricity consumed/ day

40 X 6 = 240Wh or 0.24 units 7X6 = 42Wh or 0.042 units
assuming 6 hours/day usage
Electricity Cost @ INR 2015/unit 0.24 X 20 = Rs 4.80 0.042 X 20 = Rs 0.84
Monthly expense assuming 4.80 X 30 = Rs 144 0.84X 30 = Rs 25.20
Cost of bulb Rs 10 Rs 60
Savings after replacement/ month 144 – 25.2 = Rs 119.8
Payback for replacement Less than one month
The calculation in table 1 clearly shows that the replacement of the existing inefficient incandescent
bulb with an energy-efficient LED bulb can pay back the additional investment within the first month.
It also generates continuous savings over a much longer duration as the life of LED bulbs is at least 25
15
Energy tariff as charged by ESCOs under SPRD Programme

times that of an incandescent bulb. The same is the case for other appliances. If customers are made
aware of such savings, the rate of adoption of such devices is bound to increase.
6.4
Importance of Promoting EEAs
In the context of solar mini-grid where the cost of electricity is higher than the central grid, EEAs
becomes very important in reducing the cost of consumption and reduces generation pressure on the
ESCO. Promoting EEAs in a mini-grid is essential because it generates several benefits to both the
consumers and the ESCO, as enumerated below.
6.4.1
Benefits of EEAs to Mini-Grid Consumers
Adoption of EEAs by households can generate the following benefits:
• Efficient usage: with the same amount of energy consumption, a household can derive more
benefits from the electricity that it consumes. For example, more than five LED bulbs can
replace an existing incandescent bulb thereby providing the household with more light across
the household post replacement
• Generating savings: a household can reduce its electricity bill by replacing energy-inefficient
appliances with efficient ones.
• Increasing demand: once the above two benefits are realized, the household starts to move
up the energy ladder, which creates a strong need for new uses of electricity. During this stage,
consumers begin to use appliances that they would not have used otherwise, which translates
into an improvement in the quality of life and an increase in household incomes.
6.4.2
Benefits of EEAs to ESCOs
Promotion of EEAs is also beneficial to the ESCOs through:
• Higher capacity utilization of mini-grid: EEAs cuts across the customer segments –
households, commercials, and institutional, therefore, can significantly contribute towards
the capacity utilization of the solar mini-grid.

• Decreases demand: though counter-intuitive, this is a positive development for the ESCO as
with reduced demand from existing consumers, ESCO can now focus on promoting MEDs,
which are financially more rewarding, matches the generation curve, and contributes to the
long-term sustainability of the mini-grid.
• Avoiding demand peaks: supplying electricity to meet spikes in demand is a big challenge for
mini-grids. Inefficient loads coming online create power surge requirements that are difficult
to serve. The ESCO needs to build up new generation and energy storage capacities, which
have low capacity utilization and contribute negatively to the financial viability of the mini-
grid. Large scale adoption of EEAs helps avoid this challenge.
• Retaining consumers: it has been observed that consumers who adopt EEAs tend to stick
with the mini-grid and have much less tendency to drop off. It provides the ESCO with assured
revenues over longer durations.
At the village level, the benefits of large-scale adoption of EEAs are immense. For example, let us take a
village of around 300 households and having eight shops. The daily electricity consumption and
overall expenditure of such a village pre and post-adoption of EEAs (specifically LED bulbs, fans, and
TVs) are shown below.
Table 6.2: Cost Savings after the adoption of EEA by 30% household in a village
Daily Electricity cost
Wattage No. of Daily usage
Household/Shops Load assessment Consumption perday @ INR
(W) Appliances (h)
(kWh) 20/unit (Rs)
Bulb 40 200 6 48 960
Pre EEA Households/
Fan 75 50 8 30 600
adoption Shops
TV 150 20 4 12 240
Total 90 1,800
LED 40 140 6 33.6 672

Households/
Fan 75 35 8 21 420
Shops
30% EEA TV 150 14 4 8.4 168
adoption
LED 7 60 6 2.52 50.4
30%
conversion Fan 40 15 8 4.8 96
TV 45 6 4 1.08 21.6
Total 71.4 1,428
From the above table, we can see that if all the households and shops replace their existing
incandescent bulbs, fans, and CRT TVs with LED bulbs, energy-efficient fans, and LED TVs,
respectively, the village overall can save 21% electricity usage (and hence expenditure). As mentioned
earlier, when households realize the savings that EEAs generate, they tend to use more of such
appliances at the village level.

6.5
Factors Affecting the Adoption of EEAs
We can observe that the large-scale adoption of EEAs in a mini-grid has apparent benefits (Box 1). Still,
at the village level, this does not happen as expected. Lack of awareness, high upfront costs, poor
marketing/ sales, and after-sales network of manufacturers, and lack of financing are the significant
reasons (figure 6.3).
Underdeveloped High
marketing upfront
channels costs
Lack of Poor Lack of

awareness Adoption financing
of
EEAs
Figure 6.3: Reasons for poor adoption of EEAs
a) Awareness of customers: the customers in rural areas have limited knowledge of EEAs
about:
I. Overall net savings despite high upfront costs
ii. Differentiation of EEAs with conventional appliances as well as other EEAs, i.e., star rating
iii. Quality standards and credible manufacturers/vendors of EEAs
b) The high upfront cost of EEAs: one of the significant challenges in the adoption of EEAs is
their high upfront costs as compared to conventional appliances.
c) Underdeveloped marketing channels: lack of availability of ground-level information like

consumer preference, their paying capacity, usage often lead to poor marketing of EEAs.
Manufacturers typically ignore these customers who are at the bottom of the p yramid citing
higher customer acquisition and servicing costs.
d) Lack of financing: as the upfront costs of EEAs are comparatively higher than existing
appliances, and rural consumers find it challenging to purchase them without financing
support, which is generally lacking.

6.6
Load Acquisition Strategy by
Promoting EEAs
Against the above background, ESCOs can adopt a passive role and wait a more extended time for the
uptake of demand from households, shops, and small commercial customers. Alternativ ely, they can
adopt an active role in accelerating an increase in demand by promoting EEAs. A successful EEA
promotional strategy should include the following initiatives individually or in combination:
• Increase in awareness: ESCOs should educate their customers with savings on electricity
bills, quality of EEAs, and credible vendors.
• Reduction in prices of EEAs: ESCOs can purchase EEAs in bulk from vendors resulting in
better rates for ESCOs.
• Introduction of new packages: ESCOs can introduce packages which include both EEAs and
electricity.
• Partnering with financial institutions: ESCOs can partner with financial institutions like
microfinance institutions to provide EEAs, especially big-ticket appliances like television sets
and refrigerators, to customers through monthly installments. MFIs, with the support of
ESCOs, can sell EEAs and collect the payment through monthly installments. ESCOs might
have to build the capacity of MFIs in selecting EEAs, vendors, and estimating monthly
installments.
• Partnering with distributors: ESCOs can enter into partnerships with reliable brands and
bring their products to their consumers.
• Incentivizing EEAs: ESCOs can incentive their customers to adopt EEAs through a discount
on a bill or provide free/ discounted EEA items like bulbs or fans.

Increase in energy consumption post EEA adoption
Studies conducted by SPI have shown that the adoption of EEAs has increased when supported
with focused distribution and deeper ground-level engagement. Wherever ESCOs have
distributed EEAs, the adoption of consumers to the mini-grid has also been higher. It has also been
found that per capita consumption of electricity has increased wherever EEAs have been
introduced, as shown in the figure 6.4.
+142% Nov 2016
The reasons for increased consumptions are: Nov 2017 (Post Pilot)
6.83
1. Improved reliability of services due to +9%
mini-grid increased consumption. 4.45 4.87

2. Change in consumer behavior due to the 27%
reduction in electricity expenses. 2.82
A pilot test by SPI also demonstrated that average

revenue per user (ARPU) increased by 90%, i.e.,
INR 228 per user for EEA customers. Hence the
EEA sites - 30% and EEA sites - lesser than
adoption of EEA's by customers means higher higher penetration 30% penetration
revenue for ESCOs. Figure 6.4: Change in average energy consumption
6.7
Need for Marketing and Finance
EEAs are generally costly, and their marketing channels, along with after-sales, is limited to urban and
peri-urban areas. It limits the adoption of EEA devices. Therefore, marketing of EEAs coupled with
16
service support increase the adoption of EEAs . While designing the marketing strategy, the ESCO
may consider the following:
• ESCO can be a distributor of the EEA device and can actively promote the products among the
rural population.
• ESCO can also bundle various EEA devices in a package that can be sold to different
population segments.
• While the manufacturing companies can sell their EEAs, ESCO can provide service support.
The customer or manufacturing can pay the cost of service.
Financing support is an enabling factor, which ensures that household adopts EEA devices. The initial
upfront cost is recovered in the form of accrued benefits in the form of savings in the energy bill. There
could be a different model to provide access to finance for EEAs depending on –
16
The State of The Off-Grid Appliance Market published by Global Leap; page no.8-10

• Direct selling: the ESCO themselves becomes distributor of the EEA product and recover the
cost of the product by building them in the regular energy bill.
• CSR activities: providing simple EEA device like LED bulbs at zero cost as a part of CSR
product of corporates
• Partnership with lending agencies and EEA manufacturing companies: ESCO can partner with
lending institutions like microfinance institutions, banks, and other NBFCs and EEA
manufacturing companies where the lending companies provide credit to the individuals on
purchase of EEA device from the manufacturing companies.
The adoption of EEAs by the customer and the promotion of the EEA market in the rural areas by
ESCOs is a win-win strategy where the customer gains by reducing energy consumption with similar
output. At the same time, the ESCO increases their depth of outreach. Some factors limit their
adoption by rural customers. Therefore, ESCO should devise strategies like pricing, partnership with
financial institutions, and improving marketing channels to overcome these challenges and help in the
promotion of EEAs.
Points to remember
While promoting EEAs, one should remember:
• Win-win intervention: adoption of EEAs by consumers and promotion of the same by

ESCOs is a win-win intervention and should be a significant focus of the ESCO setting up
and running the mini-grid
• Communication of benefits: the initial thrust of the ESCO should be to convey the
financial benefits of different EEAs. The early adopters go for replacements when they get
to know about these benefits.
• Need to build partnerships: encouraging large scale adoption of EEAs is not the primary
line function of an ESCO, and it needs to develop partnerships with manufacturers/
suppliers in making products available at the village level.
• Addressing financing needs: being comparatively expensive, the ESCO has to take the
lead in working with MFIs to develop financial products for EEA purchases by consumers.

7
NEW
DEMAND
GENERATION
7.1
Background
As mentioned earlier, higher capacity utilization of mini-grid positively contributes to its financial
sustainability. The cost of a mini-grid is sometimes only justified when productive loads—especially
daytime loads—are large enough to supplement the night-time household loads. ESCOs need to put in
additional efforts in developing new electricity demand through village level micro-enterprises,
which may depend on the mini-grid to ensure the usage of electricity for productive purposes. ESCOs
need to invest resources in screening such micro enterprises, mark et linkages, training and capacity
building of the local community to stimulate the creation of micro-enterprises (figure 7.1). The key
consideration that the ESCO needs to keep in mind is that micro-enterprises are likely to come up or
existing micro-enterprises may subscribe to the mini-grid sooner than later.
75-80%
40-45%
30-35%
10-15%

for households Expansion of Existing Introduction of
and shops Commercial Loads EEAs New Demand Generation/
Micro Enterprise Development
Identifying the likely micro-enterprises early on, assisting them in developing robust business plans,
and identifying financing modalities is very important. Development of new demand also helps in:
1. Adding new services other than electricity where micro-enterprise has become available to
the local community
2. Creating a social impact on livelihood/health/education of the local community, which results

in higher acceptance and use of the mini-grid.

Making the right selection for micro-enterprise is a complex task because of the number of factors to
consider. The decision becomes even more intricate when there are competing factors and activities
for determining a micro-enterprise for new demand. It calls for a structured approach to new demand
generation. Assessing this need, SPI has developed the '5S' framework as an approach to the selection
of micro-enterprise for new demand. This chapter details the process of exploring new demand
generation using SPI’s ‘5S’ framework.
Subsequently, this chapter also describes the steps in using the framework to follow the right
sequence of filters to select potential micro-enterprise.
7.2
Defining a Micro-Enterprise
17
According to the World Bank’s SME department , a micro-enterprise is defined as an enterprise that
18
has one to nine employees. However, this definition is context-specific. For example, in India micro-
enterprise is defined as an enterprise where investment in plant and machinery does not exceed Rs 25
lakh. Whatever be the definition, micro-enterprises have three elements:
• A small amount of capital used
• A small number of people employed
• Specialization in providing goods and services to the local area.
For new demand generation, a micro-enterprise can be defined as any business activity that act as an
anchor load in the context of mini-grid
High Plant
Utilisation
Anchor
Load
Consistent Day Load
Figure 7.2: Anchor Load
17
http://web.worldbank.org/archive/website00504/WEB/DOC/CIS_7_SM.DOC, viewed on 1/10/2019
18
https://msme.gov.in/faqs/q1-what-definition-msme, viewed on 1/10/2019

An anchor load is an activity or enterprise which has a contribution towards high capacity utilization
of 30 to 60% of the total electricity generated by the mini-grid consistently and mainly as a da y load
(figure 2). Anchor load stabilizes the income of mini-grid and increases its profitability; however, the
risk then, of course, depends on the performance of the anchor load’s business activity.
7.3
Data Collection for New Demand Generation
Data collected during the site selection stage forms the basis for new demand generation as well.
However, data points, level of analysis, and the process of finalizing new demand are different. The
mini-grid demand generation team of the ESCO should analyze the following data from the site
selection process:
a) Site profiling survey: this covers both desk and primary research of the major economic
activities existing in the potential mini-grid site.
b) Detailed electricity survey for demand generation: it provides the data points on existing
MED activities, associated motor loads, alternate sources of electricity and demand for the
mini-grid.
c) Assessing opportunities for micro enterprise development: initially designed detailed

survey capturing site-specific information to bring out the opportunities for potential micro
enterprises for scaling up in a geography such as water treatment unit, flour mill, oil e xpeller
etc. The survey should include standard items in the study like cropping pattern, agricultural
produce, raw material availability, local consumption pattern, quality of water, groundwater
level, skill set available with the community etc.

7.4
SPI’s ‘5S’ Framework for New
Demand Generation
SPI has developed '5S' framework for new demand generation to help a practitioner to select micro-
enterprise focusing on five broad components and their subcomponents represented as a key as it
acts as a key or guide for an ESCO. The following figure describes the '5S'framework and its
components.
Plant Performance
ME Profitability
Social Impact
M ENT
S
ES
SS
EA
Electricity Growth
SI T
Demand Factor
Impacts
Demand Condition Load Suitability
Factor Condition Replicability
SELECTION
Intervention Financial
SUPP
Design Viability
Linkage-Market, Break Even Time
Financial Capacity Break Even Volume
OR
Building
T
EQ
R
U IRE
D
Figure 7.3: SPI’s ‘5S’ framework for new demand generation
Figure 3 represents the ‘5S’ framework of SPI and has 5 major components each depicted b y an ‘S’ –
Site identification, Scale potential, Support required, Sustainability, and Selection. These factors are
discussed in details in the following section.

7.4.1
Site Assessment
This is the first component, and comprises two sub-components- Demand Conditions and Factor
Conditions. The site assessment is part of the site selection process as explained in Chapter 3.
Economic activities or sub-activities are identified based on the data collected at the time of site
selection. Site assessment gives a list of possible economic activities and has following components.
a) Demand Conditions: it refers to local demand, external demand, mild competition, cost
competitiveness, and presence of alternative. Analysis of the activities is done on these
parameters to assess their suitability.
b) Factor Conditions: it refers to the presence of surplus raw material and current source of
electricity suited to the micro-enterprise as necessary factor conditions. These are conditions
that are advantageous to a particular type of enterprise in a given area therefore their
presence is necessary to achieve scale and build business around them.
7.4.2
Scale Potential
This is second component of the ‘5S’ framework and refers to the potential to scale for the micro-
enterprise in a mini grid cluster. It is measured through load suitability and replicability of the activity,
as explained below:
a) Load suitability: it refers to identification of an activity that fits as an anchor load. Further, the
requirement for a single-phase or three-phase connection, electricity surge motor efficiency
and voltage by the specific load should also be considered.
b) Replicability: this helps us to understand the probability of such business activities in close
cluster of mini grids with similar site conditions. ESCOs may build their expertise for the most
replicable new demand generation. The water treatment unit can be taken as an example,
which shows the potential to scale as more and more villages are adopting RO filtered water
with an increase in awareness.
7.4.3
Support Required
A micro-enterprise identified may requires external support to be sustainable in the long run and thus
generate long term revenues for the ESCO. The assistance that a micro-enterprise may require:

a) Market linkages: initially, the village level
enterprises may require support to establish MED 2
linkages to any stakeholders in the value chain for MED 1
the sustaining their business. This may be financial
Support Cost
linkages for capital investment or market linkages
for business growth. MED 3
b) Capacity building: most of the new demand

generation activity will be established by village
Load Factor
level entrepreneur and will require handholding
support from the ESCO or any livelihood agency.
Figure 7.4: Support cost and electricity
ESCOs need to evaluate the time and resources
utilization comparison
required to providing such facilitation for
successful enterprise.
However, extending support is resource-intensive, and the ESCO needs to assess the expected
returns from its efforts. Long term sustainability of performance for the ESCO is directly proportional
to the load factor and inversely proportional to the amount of support cost of the micro-enterprise.
The ESCO should undertake an analysis of these parameters before finalizing on the micro-
enterprise. As illustrated in figure 4, if there are three plausible activities, which can be shortlisted,
then MED 3 should be selected because this activity will yield maximum electricity utilization of the
mini grid for every unit of investment made.
7.4.4
Sustainability
Sustainability forms the core of a micro-enterprise and refers to assessing the financial viability of the
micro-enterprise Form the perspective of new demand generation financial sustainability refers to an
activity which generates surplus/profit to keep the business running for a long time. Financial viability
is analyzed on two key parameters:
a) Length of payback: it is the point in time from the start of operations of a micro-enterprise
until it becomes profitable. That is when the cumulative capital expenditure and operational
expenditure are fully met from the cumulative net operational profit. There are two related
concepts to the length of payback:
i. When the variable expense is reduced to such a level of production where the operations
become profitable. This is known as operational break even.
ii. When variable expense and capital invested becomes fully met cumulatively from the
cumulative net operational income. This is known as full break even.
b) Payback volume: it is the cumulative amount of profit over a period of time from the start of
operations of the micro-enterprise. This financial analysis is assumption based and takes into
account all costs involved, and the future cash flows from the micro-enterprise. This is
important from the point of view of comparing profitability for the investment to be made.

By the time financial analysis starts, ESCO will have a more specific list of viable micro enterprises and
more detailed information to help build the assumptions for the business models leading to more
realistic projection and analysis.
7.4.5
Selection
Selection is the final step for choosing a micro-enterprise aligned with the impact an ESCO wants to
achieve as per its organizational objective. Depending on the objective of the organization – social,
commercial, or mixed, the final selection of the micro-enterprise takes place. Key components of
selection refer to the following:
1. Profitability: the selection of an enterprise based on the sole criteria of profitability. It refers
to micro-enterprises with higher profit margins and low gestation period.
2. Social impact: those enterprises which are high on social impact in terms of livelihood
generation, well-being of women and children, reduction in carbon emission, or improving the
lives of people in the catchment area of the mini-grid.
3. Plant Performance: it refers to selection of an enterprise on the criteria of utilization of

electricity produced by the mini-grid. There are ESCO who follow this as their primary criteria
and often set up a mini grid in an area where they have already identified anchor load e.g.
telecom tower and electricity supply to the local population comes only as secondary priority.

7.5
Steps for Executing the ‘5S’ Framework
While analyzing the approach for selection of micro-enterprise following steps emerge.
Figure 7.5: Steps for executing the '5S' framework
Scale Support
Site assessment Sustainability Selection
Potential Required
Site Selection
1
DES Data
Field
discussion
Site
Profiling
Survey
2
ESCO Project Development Team
Possibility
of MED
No Stop
Reject
Activities
Yes
No
3 4
Factor Demand
Conditions Conditions Yes
met? met?
Scalable
Reject Reject
Activities Activities
Yes
7 8 9
Matches
ESCO Management
High support Sustainability

requirement Impact objective
check
Yes Yes
of ESCO?
Reject Reject ME
Activities Activities Selected

The steps given in the above figure are illustrated through the following example – the case of Rampur
village (box 1).
Box 1: Rampur village
Rampur village is located around 20 km from the state highway. The development block
headquarter is 10 km away from the village. The block has a population of 1,00,000 and has
schools, colleges, and other government offices. The number of households in the village is
570 and the total population is 3,000. There is a small market in the village with 50 small shops
and 4-5 micro enterprises. The grid supply of electricity is inconsistent and power outages are
very common and for long durations. The situation during the summers is even worse and
electricity supply is usually not available during daytime. Single phase connection makes
running of commercial motors a difficult task.
The cropping pattern in the area is good, and usually, two crops are grown in a year – paddy in
kharif and wheat in rabi - with intervening vegetable growing season. The village in the region
are mostly dependent on diesel pump sets for irrigation as the grid electricity supply is
inadequate. Animal husbandry is only for sustenance. However, organizations are working in
the area in the promotion of back yard poultry and apiculture. The region is also rich in
mustard seed production, which is processed and consumed locally. Since the place is also
near to the sea, fishing is a common occupation, and fishes are sold in the local marketplace.
Seasonal variations in temperature are not high with mild winters and long summers.
Considering Rampur village as an example where an ESCO plans to set up mini-grid let us now analyze
it for selecting a potential micro-enterprise. Analysis is done as per the steps mentioned in figure 5.
Site Assessment
Site assessment covers step 1 to 4 of executing the ‘5S’frameowrk. These steps are detailed as below:
Step 1: Field discussions
Given the background and the regional characteristics as mentioned above, the demand generation
team first analyzes the site data to find out the existing potential micro-enterprises (ME). Then s/he

goes to the operational area of the site and talks to the local people and entrepreneurs and lists
different new demand generation activities.
Step 2: Possibility of MED

After the initial discussion and analysis of data it is assessed whether a micro-enterprise can be setup
in the area or not.
Table 7.1: List of potential micro-enterprise

S.N. Activities Electricity Demand
1 Water Treatment Unit
2 Oil Expeller
3 Flour mill/Pulverizer
4 Irrigation pump
5 Bulk Milk Chiller
6 Honey Processing Unit
7 Rice Huller
8 Seed business
9 Fish processing/Cold Storage
10 Chicken Rearing
Once the activities have been listed, then they are shortlisted based on electricity demand. As
observed, out of the activities like Seed Business and Processing of mustard seed though lucrative
livelihood options in the agricultural belt are irrelevant from a mini-grid perspective. So, for the next
step, we eliminate this activity.
Step 3: Factor conditions check
In this step, we eliminate the activities based on whether existing grid supply is suited to production
and secondly on whether there is an availability surplus of raw material. We find out that since the grid
supply is inadequate, it is not suited for any of the activities. It means that all the activities selected
qualify.
Table 7.2: Demand Conditions Check

S.N. Activities Grid supply for ME? Surplus local raw material?
2 Oil Expeller
4 Irrigation pump
5 Bulk Milk Chiller
6 Honey Processing Unit
7 Rice Huller
9 Chicken Rearing

On the other parameter, we find that the 'Honey Processing Unit' and 'Chicken Rearing' do not have a
local surplus. Still, people can be motivated to rearing chicken, and there is already a local organization
which is supporting this activity. However, production is not regular, and consumption is primarily
outside the area. Setting up an apiary and motivating people to take up this activity, therefore, is a
long-drawn process. As a result, this activity gets rejected at this stage.
Step 4: Demand conditions check
The next step is to filter out the activities based on 'Demand Condition,' which covers factors like –
local demand, external demand, mild competition, cost competitiveness, presence of alternatives.
The following table summarizes the activities based on these parameters.
Table 7.3 analyzes Demand Conditions for the production of these micro-enterprises. For example,
for Water Treatment Unit (WTU), the demand for purified water that is being analyzed, and for Bulk
Milk Chiller, it is the demand for milk from local dairy units. Micro-enterprises such as flour mill and
irrigation pump will always bank on local demand. 'Presence of Alternative' is an important
parameter to note here. A negative result on the presence of alternatives is good for the proposed
micro-enterprise.
Table 7.3: Demand Conditions Check

Local External Mild Cost Presence of
S.N. Activities
Demand Demand Competition Competitiveness Alternatives
2 Oil Expeller
4 Irrigation pump
5 Bulk Milk Chiller
6 Rice Huller
8 Chicken Rearing
The table above gives mixed results. However, based on cost competitiveness and the presence of
alternatives, we can eliminate bulk milk chiller and chicken rearing from the list of activities because
the product is not competitive and options to the product already exist.

Scale Potential
The next stage in the process is to filter out activities depending on the possibility that they offer in
scaling up. Each micro-enterprise is measured against their load suitability and replicability; this is
elaborated in Step 6.
Step 5: Scalable
This is measured as suitability as an anchor load and on the potential to scale in the future. Let us
understand this from Table 7.4 given below. We see that except for chicken rearing, which requires
electricity for lighting and ventilation during the night, all other activities qualify for load suitability
and scalability. The list of activities is now sent to the management of the ESCO for further analysis.
Table 7.4: Growth Potential Check

S.N. Activities 30-60% electricity Consistent Potential
Day load
utilization demand to scale
3 Irrigation pump
4 Oil expeller
5 Fish Processing/Cold Storage
6 Rice Huller
Based on analysis in table 4 we can eliminate fish processing/cold storage activity due to its localized
demand and dependence upon fishing as livelihood activities.

Support Required
The next process in implementing the 5S Framework is to assess each micro-enterprise on the extent
of support required (figure 6). The amount of time and associated costs involved in capacity building,
awareness creation, creating financial and market linkages for the enterprise is assessed based on the
cost involved.
Step 6: High support requirement
At this stage level of support required is checked for different activities. Associated costs, as relevant
for various activities, are then factored in doing the financial analysis in the next step. Table 7.5 given
below depicts the costs involved in support required across various parameters. It can be observed
that micro enterprise like water treatment unit, irrigation pump and oil expeller required
comparatively higher support and need to facilitate by expert agency.
Table 7.5: Support Required Check

S.N. Activities

3 Irrigation pump
4 Oil Expeller
5 Rice Huller

Sustainability
Based on the input of the field team, and data collected during the site survey, the financial analysis of
the shortlisted micro-enterprises is carried out. The financial viability of each enterprise is checked
mainly on two parameters – the payback period and payback volume.
Step 7: Sustainability check
Comparison of results of different activities on these two parameters is given in Table 7.6. However, it
is to be noted that other costs like maintenance cost, storage requirement, branding and packaging
cost, and quality control cost should also be factored as per different new demand activity to assess
the financial viability and payback period. In this case, financial analysis reveals that rice huller, can be
eliminated as it is not financially viable.
Table 7.6: Financial Viability Check

S.N. Activities Payback Volume Payback Period
3 Irrigation pump
4 Oil Expeller

Selection
It is the final stage in implementing the ‘5S’ framework to take decision on new demand generation
activity influenced by objective of the ESCOs.
Step 8: Match impact objective of ESCO
By this time of the analysis, only four enterprises have passed all the filters. The decision now rests
with the management to select the activity based on the objective of the organization. Depending on
the objective of the organization – social, commercial, or mixed, the final selection of the micro-
enterprise takes place.
Table 7.7: Selection

S.N. Activities Profitability Social impact Plant performance
1 Water treatment unit
2 Irrigation pump
4 Oil expeller
A comparison between these three activities, as shown in Table 7.7, is based on the micro enterprise
profitability, social impact and plant electricity utilization. Water treatment units and irrigation
pumps have higher immediate social and economic effects, respectively, and the electricity from the
mini-grid can be utilized relatively quickly as compared to rice huller, which has a longer gestation.
However, in the long run, it has more significant potential to utilize mini-grid electricity. Therefore, the
final selection of the micro-enterprise is to be done based on the organizational objective. Some
organizations focus on high social impact while others may focus on early break-even. There may also
be organizations that look for higher returns, even if the break-even period is extended. Therefore,

the final selection is heavily weighted on the organizational objectives and alignment of micro-
enterprise with that.
The ‘5S’framework highlights the key factors to consider and also tells about the sequence in which
the factors are to be considered. An ESCO staff who is leading the field level operations and working
on a strategy to establish a mini-grid '5 S' framework acts as a guide. However, while using the
framework, it is essential to be objective in the assessment of activity. as it easy to get biased based on
our past experience.
A detailed illustration to the eight different micro-enterprises is given in annexure covering their
operational model, key success factors, and analysis on the ‘5S’ framework. These case studies are
based on the experience of field implementations by SPI and are a great resource for learning to apply
the ‘5S’ framework.
Points to remember
While conducting the new demand generation for mini grid, one should remember:
• Follow the order of steps: while following the framework, it is always good to follow the
sequence of steps of the '5S' framework as it helps in eliminating any decision bias.
• All elements of the framework may not be applicable: some of the factors mentioned in
the framework may not apply to certain areas, so they should be left out in the analysis.
• Data gaps lead to a wrong decision: there should not be data gaps while analyzing as it
leads to a wrong decision. All field-level data should be appropriately collected using the
tools, and multiple visits to the location should be made to build understanding before
starting the analysis.
• The objective analysis leads to better selection: objective analysis of the activities should
be done to remove any individual bias. It leads to better decision making.

8
MEASURING
THE
IMPACT
8.1
Background
Mini-grid and it services has the potential to be a significant driver of rural development, unlocking
latent economic potential and livelihoods, while simultaneously enabling aspirations for improved
quality of life. A mini-grid execution follows an input-output-outcome-impact cycle, as shown in
figure 8.1.
Input Output Outcome Impact
• Installation of • Stimulating rural • Achievement of • Improved quality

mini-grid through economies by affordable, reliable, of life of households
ESCOs increased access sustainable and as well as other
• Creating right to electricity for modern energy for community
incentives for the the MEs and HHs all (SDG7) members
ESCOs to operate in
rural markets
• Aiding for ME
development
Figure 8.1: Input-output-outcome-impact cycle for impact assessment
Existing mini-grid have already worked to realize many of these benefits like:
• Economic benefits in terms of growth in number of micro-enterprise establishment and

increase in incremental incomes due to livelihood creation, business expansion, and improved
irrigation facility.
• Social benefits like improved education indicators through access to reliable household
lighting, school power supply, and other information services
• Reduced air and noise pollution due to less usage of diesel-based generators for electricity.
This has also resulted in improved health indicators for women and children from the
replacement of polluting energy sources such as kerosene lamps, as well as specific health
initiatives taken by ESCOs

8.2
Why do we Need to Measure Impacts?
The above benefits are substantial and very relevant in the rural context. In addition to capturing
these impacts, assessment for mini-grid interventions thus needs to be carried out in a structured
manner to determine how it works, where to extend the level of efforts, how it can be refined, etc. An
impact assessment for solar mini-grid projects is thus crucial for the following reasons:
• It enables ESCOs to learn and better decision-making about improving services and achieving
maximum impact.
• It facilitates a better understanding or comparison with alternatives for investment when

making decisions on options for sustainable energy services.
• It increases the value derived to customers via a more efficient and tailored service by
increasing willingness to pay for services and further increasing the financial viability of
business models.
• It demonstrates accountability to customers, partners, and donors.
• It allows for lessons learned to be communicated. It can help to improve the quality of mini-
grid implementation through adaptations and innovation in mini-grid business models for the
base of the pyramid customers.
8.3
Approach for Impact Assessment
Approach for impact assessmentThere is a need to develop an evidence-based approach for a
practical impact assessment with clear identification of expected impacts, impact indicators, data
required to study the effects and procedures for evaluating the effect. A solar min-grid project has
social, economic, and environmental effects at the household and community levels. Table 8.1 guides
the measurement framework that can be adopted.
Table 8.1: Indicative approach for measuring the impact

Impact category Indicator Data set Methodology
Social
Usage of electricity at Applications for which • Number of electric Household survey on

the household level electricity is used appliances used in the electricity consumption
households
• How many households

used electrical appliances
• Frequency of usage

Impact category Indicator Data set Methodology
Usage of electricity for People benefitting from • Number of hours for • Analysis of the
common facilities such the common facility which electricity is logbooks of common
as community centers, used for common facilities
schools, and health facilities
facilities • Surveys and personal
• Number of people interaction with the
using the same community
Economic
Entrepreneur Setting up new A number of people set • Market based survey
development businesses in the area up a new business after
the electricity supply in • Analysing load usage
the area What to patterns
measure?
Change in business Adaptation of electric Number of

practices appliances such as entrepreneurs using
electric motors for electricity in their
business business
Changes associated • Number of Primary survey with

with operating hours, operating hours local entrepreneurs
production and revenue
• Increase in production
capacity
• Increased sales
Environmental
Reduce usage of Households using Number of households Household survey on

conventional fuels kerosene stop using kerosene for electricity consumption
(diesel and kerosene) electricity
Entrepreneurs using Number of Primary survey with

diesel for running motors entrepreneurs stop local entrepreneurs
and other appliances using diesel-based
systems
Diesel based generators Change or reduction in Primary survey in

operative in the area the number of diesel the area
based generators
It is advised that the ESCO develops its assessment framework at the start of the project and captures
the baseline information so that against the same indicators, an assessment can be undertaken after
the project is executed.

8.4
Data Collection Processes
To measure the impact listed down in the above table, ESCO should ensure timely data collection.
There is a need to collect baseline data, i.e., before the start of the project and post-implementation
data at regular intervals through primary survey, focused group discussions, personal interviews at
household and community levels. The ESCO should keep the following aspects in mind:
8.4.1
Establish Roles and Responsibilities
Establishing roles and responsibilities for undertaking each stage of these processes is essential for
accurate and timely data collection. If it is not clear who is responsible, for what and when it won't
happen!
8.4.2
Setting Baselines and Targets
Once the indicators are defined and tools to collect the data developed, it is useful to establish the
baseline values of these indicators. The baseline information is essential to measure the relative
changes that take place with the implementation of the project.
8.4.3
Technical and Non-technical
Data Collection Processes
Study of load characteristics, demand growth, etc. are linked to the operation of mini-grid. Regular
monitoring of data highlights consumption patterns at the domestic and commercial le vel, variation
in time of a day, weekly/ monthly variations, etc. Non-technical data collection processes can include,
for example, demand assessment surveys, entrepreneur surveys, and household satisfaction surveys.
Examples of possible data collection processes are provided in the table 8.2.

Table 8.2: Data collection processes
Data collection method Time of collection Frequency
Electrification status of the area, load pattern, type During the start of the project Baseline
of conventional fuel used and applications
Household satisfaction survey Within 3 to 6 months of Bi-annually

project implementation
Entrepreneur survey Within 3 to 6 months of Bi-annually

project implementation
Focused group discussion During the start of the Baseline

project Post-implementation End-line
8.5
Challenges with Data Collection
While assessing impacts, the ESCO should keep in mind the following problems in the data collection
process, like:
• Biased information about the income data as people don’t want to discuss their incomes and
don’t track their spending. Non-cash income is particularly difficult to track, as are estimates of
quantities and time in general.
• The data can be biased because of the non-participation of the woman at the household level.
Inaccurate answers can also arise if there are language differences
• The data can be incorrect in the absence of trained surveyors. The trained team, with the
presence of a local person, is better because they become specialized and efficient. The
presence of a known person creates trust within the community.

Points to remember
Input-output-outcome-impact cycle is used for measuring impact assessment by ESCOs.

Following points are useful while conducting impact assessment:
• A mini grid has both social, economic, and environmental impact on the users and the
community.
• These impacts are substantial and needs to be measured so that the ESCO can provide
better service to their customers.
• An evidence-based approach to measure the impact with clear identification of expected

impacts, impact indicators, data required, and methodology is ideal for solar mini-grid.
• Data for measuring impact is collected at various touch points while technical data is
captured through the systems.

ANNEXURES
Annexure 1: Water Treatment Unit
Wherever there is treatable groundwater , decentralized Water Treatment Units (WTUs) powered by
mini-grids can be set up to provide clean drinking water to village communities in a financially viable
manner. A typical such WTU comprises a reverse osmosis (RO) plant and a chilling unit. A WTU of 4 kW
load and has a capacity of about 1,000 liters per hour (lph) is being considered for this case study.
WTU operational model

The demand for filtered water is created by households and shops in the catchment area that can
range from 5 to 10 km. Each WTU sells water in campers/jars of typically 15-20 litres capacity at price
ranging from INR 20 to 30/camper and distributed by rickshaws or vans (see Figure 1). WTU having
1000 liters per hour capacity takes two hours to filter and three hours to chill up to 2000 liters enough
to supply 100 campers/jars. With a 4-5 hour/day operation, a WTU output is approximately 2-3,000
liters/day. A WTU unit employs an entrepreneur/operator and two other individuals to provide
operational support as a helper and delivery person.
Mini-grid
House
Filter Chiller
Shops
Water Treatment Unit
Figure 1: Operatinal model of a WTU unit
The average electricity consumption of a WTU is 14 kWh/day with a peak of 17 kWh/day in summer
and 12 kWh/day in winter. The variation is due to a reduction in water demand and the need for chilled
water in winter season. During its peak months, the WTU can act as an anchor load for the mini-grid
and draw up to 20-30% of electricity produced by the mini-grid.
19
Water without concentrations of heavy metals/minerals like Arsenic

Key success factors
Four main factors determine the commercial viability of a WTU:
State of Competition
(< 2 WTUs in catchment)
Consumer Willingness to Pay
Household Density
(> 500 Hhs/Shops in 5km radius)
Treatable Groundwater
(< 500 ppm TDS)
Figure 2: Key success factors
1. Treatable groundwater: groundwater having total dissolved solids (TDS) of more than 500
ppm and free of heavy metal pollution
2. Household density: high number of households (typically >500 HHs) close to the WTU
3. Consumer willingness to pay: success of a WTU is directly related to willingness of consumers

to pay for clean drinking water. It has been observed that commercial set-ups like shops have
higher willingness to pay as compared to households
4. Competition: the absence of a competitor in the broader catchment increases the chances of
success of the venture. However, it has been observed that the presence of more than two
competitors negatively impacts scalability.
Analyzing WTU based on the ‘5S’ framework

Site assessment
Identification of WTU as a micro-enterprise is an outcome of Steps 1 to 3. Analyzing the potential

electricity demand of the WTU suggests that it can act as an anchor load for the mini-grid. In Step 4,
factor conditions of the WTU are analyzed, and it was found that:
• The current source of electricity: lack of alternate sources or poor grid supply makes it
attractive for the mini-grid
• Availability of raw material: the site has treatable groundwater with high TDS

In Step 5, the demand conditions for the WTU are analyzed, and it was found that:
• High local demand: the household density in the immediate vicinity was found to be high, and
there is a small town near the village
• Mild competition: the nearby town has drinking water suppliers, and villagers are accustomed
to using drinking water in campers during various social occasions
• Cost competitiveness: enjoying the right factor conditions and demand, the WTU can produce
clean and cool water at competitive prices
• Presence of alternatives: hand pumps and dug wells are alternatives but provide unhygienic
water.
Scale potential
In Step 6, an analysis of the growth potential of the WTU is undertaken, with the following results:
• High load utilization: with average electricity consumption of 14 kWh/ day, the WTU can
utilize a high share of the mini-grid generation
• Constant demand: overall demand for electricity of the WTU is constant throughout the year
• Day load: operation of the WTU is a daytime activity which puts less pressure on the mini-grid
• Potential for upscaling: increase in awareness amongst the community and proximity to the
town, there is lots of scope for the enterprise to upscale in similar mini grid clusters.
Support required
In Step 7, an analysis of the support that the WTU requires in making it sustainable is undertaken, and
it was found that the ME needed market linkage, marketing, and branding inputs in the initial year
through community awareness generation initiatives is required.
Sustainability
In Step 8, the financial viability of the WTU is analyzed, focusing on the pa yback period and payback
volume. Typical capital investment for a WTU of the said capacity is around Rs 5 lakh, and the average
operating expense is around Rs 4 lakh/year. The share of different components of the CAPEX and
OPEX is shown in Figure 3. With this investment, the operating breakeven point for such a unit is
within first year, and the payback period of investment is 2-3 years.

RO Equipment Rent
56% 7%
Campars & Jars 18%

15% Maintenance
Chiller Equipment 12%
15% Electricity
Other Equipment 3% CAPEX OPEX
14% HR expense
Boring and
Water Pump 6%
Installation and 3% 18%

Delivery Cost
Transportation
2% 31%
Financial Expense
Promotional Material
Figure 3: CAPEX and OPEX components
There are two kinds of levers that affect the financial viability of a WTU – cost and revenue levers.
Cost levers are the delivery cost of the water campers and the electricity tariff of the mini-grid. The
profitability of the WTU is inversely related to the cost levers. Revenue levers are the camper price
and demand penetration; higher these parameters, better is the profitability of the venture.
Impact of WTU as micro-enterprise

WTUs powered by ESCOs are a financially viable model that achieves two-fold objectives:
1. Providing access to clean, safe drinking water to people in rural areas
2. Contributing to the growth of sustainable electricity solutions
They can also act as a catalyst for developing the local economy by providing investible opportunities
to people while improving the quality of life of people. Some of the benefits directly linked with WTU
are the following:
· WTU provides safe drinking water in rural households
· A significant drop in the number of cases of water-borne diseases in these areas
· Sustained employment of two to four persons from the local community
20
· Avoidance of carbon dioxide emissions to the tune of 25.55 tons per year .
20
Assumptions: Reduction of CO2 emission per 1 kWh of solar power = 1 kg of CO2. Please note that the above calculation
considers only the reduction in CO2 emissions for the electricity generated from a solar power plant vs. a coal plant and
does not take into account CO2 from other parts of the value chain Read more at http://www.solarmango.com/in/tools/
CO2 -emission-reduction-results/

Annexure 2: Flour Mill
A flour mill (FM) unit is a commercial entity where wheat, rice, and spices are milled and is a common
micro-enterprise in rural areas catering to domestic demands. Households bring their grains and
spices and pay a fee to get it milled. An FM once set up can serve two markets: (a) primary – village
community against extraction fee and (b) secondary – processing for forward selling in local and
regional markets. For this case study, an FM of 7.5 hp motor capacity and 80 kg/hour milling efficiency
is being considered.
FM operational model
Households bring their stored wheat for milling as per their needs. FM units also stock some wheat to
cater to the demand of customers who come to buy flour from them directly. Some FMs also sell wheat
flour to wholesalers and retailers in their area (Figure 1). Currently, operational units are milling
wheat at INR 2/kg, whereas wheat flour is sold at INR 20 to 23/kg. An FM employs one person who
handles feeding grains, monitoring output and handling flour.
Mini-grid
House
Shops
Individuals coming for
milling grain Flour Mill
Figure 1: Operational model of Flour Mill
Although wheat is harvested once a year, people get their wheat milled as per their needs, usually in
batches of 5 to 10 kg. Therefore, there is consistent electricity consumption by the FM throughout the
year. Each unit consumes an average of 15 kWh/ day.

Key success factors
The success of an FM depends on the following factors:
No Competition
2 1 3
Local Institutional Demand
High Household Density
Local Production
1. Local production: the raw material for an FM has to available in sufficient quantities for higher
capacity utilisation of the FM. The area has high local production of wheat, fulfilling this factor
2. Household density: high household density resulting in consistent demand for milling and
hence utilization
3. Local institutional demand: presence of local wholesalers and retailers to buy flour increases
contributes to the success of an FM
4. Competition: presence of local competitors adversely affects the success of an FM.
Analyzing FM based on the '5S'framework

Site assessment
Identification of FM as a micro-enterprise is an outcome of Steps 1 to 3. Analyzing the potential

electricity demand (15 kWh/day) of the FM suggests that it can act as an anchor load for the mini-grid.
In Step 4, factor conditions of the OE are analyzed, and it was found that:
• Current source of electricity: power supply in the area is inconsistent and thus an FM relying
on the grid cannot serve its clients whenever they come for milling

• Availability of raw material: wheat is the major crop in the village and is the staple grain for the
local population, thereby assuring continuous supply of raw material to the FM in required
quantities.
In Step 5, the demand conditions for the FM are analyzed, and it was found that:
• Local and inherent external demand: since both production and consumption of wheat are
endemic, there is always a demand for flour. The household density is also high in the area
resulting in concentrated demand that can be met easily
• Mild competition: there are other flour mills in the area which are mainly run on diesel
generators
• Cost competitiveness: running cost for solar-powered FM is lower than a diesel one. Also, the
maintenance cost of diesel engines is higher than that of electric motors
• Presence of alternatives: other mills are operating in nearby villages where people take their
wheat for milling. However, the FM at the site offers many conveniences to the local
population.
Scale potential
In Step 6, an analysis of the growth potential of the FM is undertaken, with the following results:
• High load utilization: with average electricity consumption of approximately 15 kWh/day, the
FM can utilize around 20-30% of the mini-grid generation
• Constant demand: demand for wheat milling shows little fluctuation and is generally
consistent through the year
• Day load: FM operation is a day time activity putting less pressure on the mini-grid
• Potential for upscaling: steady demand, higher efficiency, and quick service make the FM a
high potential micro-enterprise.
Support Required
In Step 7, an analysis of the support that the FM business requires in making it sustainable is
undertaken, and it was found that the micro-enterprise need support is creating awareness among
the community on its availability and quality of service. Further, market linkages can be established
for supplying more substantial quantities of flour to retailers and wholesalers.
Sustainability
In Step 8, the financial viability of the FM is analyzed, focusing on the payback period and payback
volume. Typical capital investment for an FM of the said capacity is around Rs 50,000, and the average

operating expense is around Rs 1.1 lakh/year. The share of different components of the CAPEX and
OPEX is shown in Figure 3.
Repair and
Maintenance
2%
Electricity Expense Financial Expense
77% 21%
OPEX
CAPEX
INR 50,000
With this investment, the operating breakeven point comes in the first year itself, and the payback
period of investment is less than a year. Cost lever for the FM is the electricity tariff, which is pre-
determined between the FM and the ESCO. The profit margin of the FM is highly sensitive to the
electricity tariff and is inversely related. Revenue lever of the FM is the milling charges, which is
generally constant in a particular region, and there is little possibility of the FM charging higher rates
to increase its margins.
Impact of FM as micro-enterprise
Flour milling in rural communities has been an unorganized sector, and the entry barriers are low. An
FM can generate the following impacts:
• Reduce travel and procurement cost for customers
• Women SHGs can start FMs generating substantial socio-economic benefits
• Create meaningful employment for one person as an operator. Besides, another person can be
employed for delivery when the business expands
• Avoidance of carbon dioxide emissions to the tune of 12.8 tons per year21.
21
assumptions: Reduction of CO2 emission per 1 kWh of solar power = 1 kg of CO2 . Please note that the above
calculation considers only the reduction in CO2 emissions for the electricity generated from a solar power plant vs. a
coal plant and does not consider CO2 from other parts of the value chain.

Annexure 3: Oil Expeller
Small scale manual/animal powered oil expellers have been in existence in oil-producing areas for
ages. Villagers bring their oilseeds and pay a fee for oil extraction primarily for domestic consumption.
In such villages where substantial cultivation of oilseed crops like mustard, rapeseed, sesame,
sunflower, karanj, etc. are undertaken, setting up an oil expeller (OE) can be explored. Such a unit once
set up can serve two markets:(a) primary– village community against extraction fee and (b) secondary
– packed oil in local and domestic markets. For this case study, an OE of 7.5 hp motor load and 70
kg/hour processing capacity on mustard seed is being considered.
OE operational model
OE units buy and stock oilseeds (for continuous production) during the harvest season, which is
compressed to extract oil and sold to wholesalers who further sell it to primary and secondary
markets (Figure 1). Also, local households bring their oilseeds and get the extracted oil paying an
extraction fee. Currently, operational OE units are processing oilseeds for a fee of INR 5/kg and sell oil
at INR 100 to 120/l in the market. The residual oil cake also carries value and is used as cattle feed and
fertilizer.
Mini-grid
Primary/local
market
Secondary
market
Oil Expeller Unit
Figure 1: Operational model of Oil Expeller
An OE unit employs two persons who feed oilseeds, monitor operations, and pack the oil. The average
electricity consumption of an OE unit is 36 kWh/day, and it varies little once a steady state of
operations is achieved. The OE can act as an anchor load for the mini-grid and draw up to 60 to 70% of
electricity produced by the mini-grid.

Key success factors
Four main pre-conditions need to be in place for the success of an OE:
Low Competition
(No other OE in the catchment)
2 1 3
Local Consumption of Mustard Oil

(>2 litres/HH)
Physical Connectivity
Mustard Cultivation by Local Farmers

(> 120 tons in 5 km radius)
1. Local production and its quality: high local oilseed production and high oil content increases
the production and productivity of the unit
2. Local demand: high local demand helps reach operational stability quickly
3. Physical connectivity: presence of a road connectivity infrastructure for transportation of oil

seeds from farms to the unit and packed oils from the unit to the market dramatically improve
operations
4. Local institutional demand: presence of wholesalers and retailers in the primary market for
offtake of packed oils
Analyzing OE based on the ‘5S’ framework

Site assessment
Identification of OE as a micro-enterprise is an outcome of Steps 1 to 3. Analyzing the potential

electricity demand (36 kWh/day) of the OE suggests that it can act as an anchor load for the mini-grid.
In Step 4, factor conditions of the OE are analyzed, and it was found that:
• Current Source of electricity: electricity supply in the area is infrequent, thereby making it
difficult for the OE to rely on it

• Availability of raw material: mustard cultivation is carried out in a large scale in the village and
the area thus ensuring adequate supply of raw material to the OE
In Step 5, the demand conditions for the OE are analyzed, and it was found that:
• Local and inherent external demand: high local household density, the proximity of
neighboring villages and a small town and dependence of the population on mustard oil for
cooking
• Mild competition: there is only one OE unit within 5 km radius
• Cost competitiveness: due to favorable factor conditions and demand, the OE unit can
produce oil at competitive market rates
• Presence of alternatives: although there are alternatives to mustard oil, the latter has been
traditionally used, making it difficult to replace.
Scale potential
In Step 6, an analysis of the growth potential of the OE is undertaken, with the following results:
• High load utilization: with average electricity consumption of 36 kWh/day, the OE can utilize
60 to 70% of the mini-grid generation
• Constant demand: driven by the constant demand for oil, overall demand for electricity of the
OE is constant throughout the year
• Day load: OE operation is a daytime activity which puts less pressure on the mini-grid
• Potential for upscaling: with the increase in market linkages with restaurants and shops
dealing in the trade of oil, there is a tremendous potential to scale the production.
Support required
In Step 7, an analysis of the support that the OE requires in making it sustainable is undertaken, and it
was found that the OE needs market linkage, marketing and branding inputs. Also, improving the
production and productivity of mustard cultivation are other options.
Sustainability
In Step 8, the financial viability of the OE is analyzed, refocusing on the pa yback period and payback
volume. Typical capital investment for an OE of the said capacity is around Rs 4.5 lakh, and the average
operating expense is around Rs 7 lakh/year (excluding the cost of mustard seeds). The share of

different components of the CAPEX and OPEX is shown in Figure 3. The cost of mustard seeds is
around Rs 38 lakh/year. With this investment, the operating breakeven point comes in the first year
itself, and the payback period of investment is 2-3 years.
Oil Expeller Rent

53% 7%
Storage Tank (2) 11% 16% Labour Cost
7.5 Hp Motor 8% 13% Transportation + Storage
CAPEX OPEX
Filtration Unit 17% 7% Miscellaneous
Storage Racks 9% 42%

Electricity
2% 15%
Financial Expense
Miscellaneous
Cost levers are the procurement price of mustard seeds, which depends on the procurement timing
and transportation cost from the farms to the unit, and electricity tariff of the mini-grid. The
profitability of the OE is inversely related to the cost levers. Revenue lever is the selling price of oil; the
higher the price better is the profitability of the venture. The selling price of oil depends on:
• Quality of oil: fat content, viscosity, and smoking point are some parameters determining the
quality of the oil. For mustard oil, the smell is a significant determinant of its price. Some
markets, however, do not prefer the raw pungent smell and OEs catering to such markets need
to invest in deodorization
• Brand differentiation: branding enables product differentiation and differential pricing
• The regularity of supply: retailers/wholesalers tend to enter into higher price contracts with
OEs which can guarantee a steady supply
• The purity of oil: being an edible commodity, marks of quality/purity leads to better price.

Impact of OE as micro-enterprise
Some of the potential impacts that local level oil extraction can create are:
• Many OEs can come together as a single organized commercial enterprise leading to
economies of scale. It could also lead to the creation of commercial hubs in rural areas, which
can further spur the development of other industries
• Decentralization of oil extraction can help improve efficiency in the supply chain by reducing
travel and procurement cost for secondary markets
• Women SHGs can start OEs generating substantial socio-economic benefits.
• Sustained employment for at least two other persons
• Avoidance of carbon dioxide emissions to the tune of 22.8 tons per year22 .
22
calculation considers only the reduction in CO2 emissions for the electricity generated from a solar power plant vs.
a coal plant and does not consider CO2 from other parts of the value chain.

Annexure 4: Rice Huller
Traditionally in rural India, paddy is de-husked manually. With increase in paddy production and
advancement in technology, motorized rice hulling units have come up across rice producing areas. At
a village level, Rice Hullers (RH) can be established with a secure and consistent source of power
produced by the mini-grids to cater to local rice milling demands. For this case, RH of 400 kg/hour
capacity is considered with a 7.5 hp motor load.
RH operational model
Generally, household consumption of paddy is processed in batches and stored; the surplus is sold to
local traders or in local wholesale markets. With access to RH in the area, farmers or local
entrepreneurs can get their paddy de-husked, store the rice and sell it in the market, for better
earning. An entrepreneur owns the RH and provides hulling service at a fee. The operating model
proposed is that a collective of women SHGs acts as an aggregator, procures paddy from the village
and nearby areas, gets them processed, and sells the rice to wholesalers or retailers. If women come as
a collective to start this enterprise, ESCO would need the support of local NGOs to mobilize the
women.
Mini-grid
House
Shops
Rice Huller
Figure 1: Operational model of Rice Huller
The processed rice can be sold either to retailers or intermediaries—the latter fetch a lesser price as
compared to the former. As paddy production is generally in the kharif season, utilization of the RH is
also seasonal, typically 8-10 months a year after harvesting and comparatively less running during the
rest of the year. The average daily electricity consumption is mainly for 10 months and in the range of
10-12kWh per day.

Key success factors
The necessary pre-conditions that can enable the success of an RH are as follow:
Absence of Big Hullers in the Vincity
Local and External Demand
Physical Connectivity
Local Production of Rice
1. Local production of rice: production of a marketable variety of rice at the location of the site is
a must as locally procured rice can be procured at much lower transportation cost as well as
storage requirement.
2. Local and external demand: rice is a highly standardized commodity with standardized
guidelines on quality and ‘grades.’ There has to be both local and external demand for the
hulled rice
3. Absence of big hullers in the vicinity: bigger rice hullers are very sophisticated and have much
larger capacities in terms of processing as well as for sorting and grading of rice. They also get
the advantage of scale with their size of production and have established backward and
forward market linkages.
4. Physical Connectivity: rice hullers that are close to the market/ households enjoy an
advantage as people prefer to get their rice hulled locally, given its daily consumptions.
Analyzing RH based on the ‘5S’ framework

Site assessment
Identification of RH as a micro-enterprise is an outcome of Steps 1 to 3. Analyzing the potential

electricity demand of the RH suggests that it can act as an anchor load for the mini-grid. In Step 4,
factor conditions of the RH are analyzed, and it was found that:

• The current source of electricity: the current grid supply is inconsistent and power cuts ma y
result in a reduced level of utilization of the RH depending on the grid
• Availability of raw material: site selection data shows that paddy is the major crop in the
village and is the staple cereal.
In Step 5, the demand conditions for the RH are analyzed, and it was found that:
• Local and inherent external demand: there is a local demand for rice as well as market linkages
with local level retailers, and intermediaries can be established.
• Mild competition: local level competition with other small RH units in the area is low, which
makes setting up RH viable.
• Cost competitiveness: cost is determined by the market and is mainly dominated by

established players.
• Presence of alternatives and replacement cost: not relevant in this case
Scale Potential
In Step 6, an analysis of the growth potential of the RH is undertaken, with the following results:
• High load utilization: average consumption in RH is around 10-12 kWh which means it can
utilize up to 20% of electricity generated from the mini-grid
• Constant demand: overall demand for electricity of the RH is mainly for 8-10 months in a year
• Day load: most of the paddy processing is done during the daytime.
• Potential for up scaling: given that there is no other RH in the area, there is potential to expand
operations beyond the village.
Support Required
In Step 7, an analysis of the support that the RH requires in making it sustainable is undertaken, and it
was found that the ME needs intensive support in terms of mobilizing people and linking them to the
RH. There are costs involved in forward linkages and motivating women SHGs to take up this activity
as a collective.
Sustainability
In Step 8, the financial viability of the RH is analyzed, focusing on the payback period and payback
volume. Typical CAPEX for an RH of the said capacity is around Rs 84,500/- and average OPEX is
around Rs 70,000/year from the third year of operations. The share of different components of
CAPEX and OPEX is shown in Figure 3.

Entrepreneur /
Operator Selection 3.6%
Labor Cost
51.1%
Site
Preparation 41.4%
Electricity Cost
CAPEX OPEX 40.4%
Installation and 7.7%

Transportation
8.5% Maintenance Cost
47.3%
Rice Huller
With this investment, the operating breakeven point for such a unit is around 1.6 years, and the
payback period of investment is 3-4 years. Cost lever for the RH is the electricity tariff of the mini-grid,
which is pre-determined between the RH and the ESCO. The profitability of the RH is inversely
related to the cost levers. Revenue lever of the RH is the de-husking charges, which is generally
constant in a particular region, and there is little possibility of the RH charging higher rates to increase
its margins. Other revenue levers are capacity utilization of the unit and the amount of production of
paddy in the area.
Impact of RH as micro-enterprise
Some of the potential positive impacts that an RH can create at the village are as follows:
• Development of local entrepreneurship for owning and running the RH
• Generating direct employment of at least one person at the unit
• If this micro-enterprise is taken up by an SHG, their members' income increases, creating

positive socio-economic changes.
• RH operating on renewable electricity from the ESCO mini-grid can also lead to a carbon
dioxide savings that can help in offsetting the emissions from fossil fuel. The electricity
consumed from the renewable electricity mini-grid leads to a carbon dioxide offset of 3 to 4
23
tons per year Per RH unit.
23
a coal plant and does not take into account CO2 from other parts of the value chain.

Annexure 5: Irrigation Pump
Except for high-value cash crops, diesel-based irrigation makes agriculture less remunerative.
Getting grid connections for irrigation pump sets (IP sets) is expensive, and due to lack of focus of the
DISCOMs in farm electrification, this remains a challenge for small scale farmers. Besides suppressed
tariffs and over-exploitation of groundwater compounds the problems of the DISCOMs and the
State. Keeping this in mind, the promotion of solar pumping has been a focus of the Government. With
the availability of electricity from the mini-grid, instead of standalone solar pumps, electrical IP sets
can be set up as a micro-enterprise, thus bringing down the in vestment required by the farmers and
simultaneously helping them enjoy the benefits of cheaper power from solar. For this case study, an IP
set of 5 hp capacity with a command area of around 30 acres is being considered.
IP operational model
The electric IP set distributes/pumps water from either underground or surface source and
distributes it to farms through a network of pipes. Supply to farms is according to a pre-decided
24
schedule and rate (Figure 31). The IP sets can be run by an entrepreneur or be run in a Company-
Owned and Company-Operated (COCO) model, where the ESCO takes the lead. In the latter model,
ESCO funds and runs the system and employs an operator to carry out daily operations. ESCO makes
profits, and electricity costs are internalized.
Mini-grid
Figure 1: Operating model of an Irrigation Pump
The average annual electricity consumption of an IP set is 17 kWh/ day, with seasonal fluctuations,
higher in rabi (winter) and lesser in kharif (monsoon) which potentially can be increased by scheduling
and working on changing the cropping pattern in the village. Electricity consumption is expected to be
lower in the case of the entrepreneur-led model due to the possible prevalence of alternatives and
100% from the mini-grid in the COCO model.
24
The rate may be volumetric or hourly based.

Factors determining IP success
The success of an IP depends on the following factors:
Availability of water
Cropping Intensity
(>2 crops per yr)
Land Holding Per Farmer

(>0.5 acre per farmer)
Prevalence of Irrigated Agriculture

(>20 acres / pump)
1. Prevalence of irrigated agriculture: presence of irrigated (preferable) or arable land in the

vicinity of the mini-grid site (typically > 20 acres/pump)
2. Land holding of farmers: farmers in the proposed command area should have some minimum
land holding, preferably > 0.5 acre/farmer
3. Cropping intensity: high cropping intensity (typically >= 2) indicating the practice of irrigated
agriculture
4. Availability of water: the raw material (if one can say so) for an IP is water, and that should not
be a constraint
Analyzing IP on the ‘5S’ framework

Site assessment
Identification of IP as a micro-enterprise is an outcome of Steps 1 to 3. Analyzing the potential

electricity demand (17 kWh/day) of the IP suggests that it can act as an anchor load for the mini-grid.
In Step 4, factor conditions of the IP are analyzed, and it was found that:
• Current source of electricity: running of 5 hp (and above) IP need 3 phase electricity supply at
the farm level, is almost absent. Diesel-powered irrigation is practiced but is financially not
rewarding to the farmers

• Availability of raw material: site selection data shows high groundwater availability in the
catchment area.
In Step 5, the demand conditions for the IP are analyzed, and it was found that:
• Local and inherent external demand: rich agricultural belt at the site location and qualifies for
more than 30 acres of agricultural land in the catchment area of the site
• Mild competition: high dependence on diesel-based pumps which is very costly
• Cost competitiveness: with a continuous rise in diesel prices and increasing maintenance cost
of diesel pumps, running electric IP sets is cost-effective for the farmers. Also, maintenance
costs are comparatively less for electric IP sets
• Presence of alternatives: grid-based IP sets connections are difficult to access. Also, the
supply of power is erratic.
Scale Potential
In Step 6, an analysis of the growth potential of the IP is undertaken, with the following results:
• High load utilization: with average electricity consumption of 15 kWh/day, the IP can utilize
around 30% of the mini-grid generation
• Constant demand: demand for irrigation is throughout the y ear, with small variations, which
can be smoothened by working on cropping pattern changes
• Day load: demand for irrigation is during the day putting less pressure on the mini-grid
• Potential for upscaling: electric IP sets have the potential to replace all existing diesel IP sets
because of lower cost and very low maintenance.
Support Required
In Step 7, an analysis of the support that the IP requires in making it sustainable is undertaken, and it
was found that this micro-enterprise needs support in creating awareness among the farmers on its
quality of service and benefits. Support is required to work on changing the cropping pattern and
improving the cropping intensity to more remunerative and round the year crops.
Sustainability
In Step 8, the financial viability of the IP is analyzed, focusing on the payback period and payback
volume. Typical capital investment for an IP of the said capacity is around Rs 1,25,000/-, and the
average operating expense is around Rs 2.8 lakh/year. The share of different components of the
CAPEX and OPEX is shown in Figure 3.

Pole & Wires
24% 7% Labour Cost
Boring 16%
Installation & 5% 62.5% Electricity

Transportation Cost
Irrigation 31% CAPEX OPEX

Pump
Digital Flow
Meter 12% 1.65% Maintenance
Cost
Flexible 3%
Pipe (200m)
8% 0.74% Miscellaneous
Training
With this investment, the operating breakeven point comes in the first year itself, and the payback
period of investment is one and a half years. Cost lever for the IP is the electricity tariff of the mini-grid,
which can be set by the ESCO, which depends on the willingness of the ESCO and distance of the IP
from the mini-grid generation. The price of pumped water and pump utilization factor is the critical
revenue levers that affect the financial viability of an irrigation pump. IP services fail to command
customer loyalty, and as a result, 'stickiness' to one service is low, with farmers changing service
providers for slight differences in price. Price of alternates, number of competitors, and depth of
water table in case of groundwater-based pumping determine the price charged.
Impact of IP as micro-enterprise
Mini grid intigrated irrigation pumps operating as a microenterprise has the potential to improve the
irrigation services in rural areas, particularly those of small scale farmers. Without this, farmers
depend on the rains (risky) or diesel IPsets (expensive), making agriculture risk-prone and non-
remunerative. Thus, the potential impact of solar-based IP can be summarised as:
• Reducing risks of crop failures

• Increase area under irrigation
• Increase in cropping intensity
• Encourage farmers to shift to high-value crops (change in cropping pattern)
• With volumetric based payment, improve the water use efficiency
• Savings in costs and hence increase in profits of farmers
• Reduction in local level pollution from diesel-based IP sets
25
• Avoidance of carbon dioxide emissions to the tune of 27.2 tons per year .
25
a coal plant and does not take into account CO2 from other parts of the value chain Read more at
http://www.solarmango.com/in/tools/CO2 -emission-reduction-results/te may be volumetric or hourly based.

Annexure 7: Honey Processing Unit
A Honey Processing Unit (HPU) can increase the shelf life of honey before it is packaged and sold in
the market. Setting up of an HPU makes beekeeping (apiary) an attractive livelihood option and can
help increase incomes of families. For this case study, an HPU of 4 kW motor load and 50kg/hr
processing capacity is being considered.
HPU operational model

While setting up an HPU, its ecosystem also needs to be created either through the third party or
directly, the ESCO mobilizes and incentivizes groups of bee-keepers (both new and existing) to supply
honey to the HPU. Once procured, honey is processed and sold to wholesalers and retailers.
Establishment of marketing linkages, marketing, and sales is best handled by an expert third party to
eventually transition these responsibilities and overall unit operations to the beekeepers who may be
organized as a cooperative or producers' company. Operational expenses are met through a
combination of HPU revenues and support from ESCO. HPU of the said capacity consumes an average
of 34 kWh/day in a steady-state year. This is a conservative estimate given that the steady-state sales
target is 80% of the unit's processing capacity. The electricity consumption could be lesser, depending
on the availability of the grid and the HPU using both sources of electricity.
Mini-grid
Primary/local
market
Secondary
market
Collection Honey Processing Unit
Figure 1: Operational model for Honey Processing Unit

Key success factors
The necessary pre-conditions that can enable the success of a HPU are as follow:
Abundance of nectar-
rich flowers
Presence of water source

in farms
The proximity of apiaries

of HPU
The proximity of HPU to

primary regional market
1. Abundance of nectar-rich flowers close to apiaries: high density of nectar-rich flowers such
as sunflowers, lavender, salvia, etc. close to the apiary
2. Presence of water source in farms: the presence of water source close to the flower
farms/areas
3. The proximity of apiaries to HPU: apiaries within 15 to 20 km from the HPU to ensure that the
costs of transporting raw honey to the HPU are not high
4. The proximity of HPU to primary regional market: to keep costs of transporting honey to
retailers and distributors under check.
Analyzing HPU based on the ‘5S’framework

Site assessment
Identification of HPU as a micro-enterprise is an outcome of Steps 1 to 3. Analyzing the potential

electricity demand (34 kWh/day) of the HPU suggests that it can act as an anchor load for the mini-
grid. In Step 4, factor conditions of the HPU are analyzed, and it was found that:
• Current source of electricity: inconsistent power supply risking the quality of the honey that is
processed, hence the need for the mini-grid

• Availability of raw material: the presence of the natural source of water and neighboring
nectar-rich flower fields.
In Step 5, the demand conditions for the HPU are analyzed, and it was found that:
• Local and inherent external demand: this refers to the consumption of honey in local and
nearby regions to estimate the sales potential.
• Mild competition: there are several brands at the national level, but there is always a demand
for local honey from bulk purchasers
• Cost competitiveness: price of honey is determined by the market, which is dominated by big
players, whose scale of operations is manifold. Keeping costs low by the HPU to meet market
prices is a challenge
• Presence of alternatives: honey is a specific commodity and there are not alternatives
Scale Potential
In Step 6, an analysis of the growth potential of the HPU is undertaken, with the following results:
• High load utilization: with average electricity consumption of 34 kWh/day, the HPU can utilize
more than 30—40% of the mini-grid generation
• Constant demand: demand for processed honey is throughout the year
• Day load: processing and packing are daytime activities putting less pressure on the mini-grid
• Potential for upscaling: the HPU can act as the primary electricity consumer in the mini-grid.
Support Required
In Step 7, an analysis of the support that the HPU requires in making it sustainable is undertaken. It
was found that the micro-enterprise needs intensive support for mobilizing people, training and
capacity building of beekeepers, investment in branding and marketing of processed honey, getting
Government certifications, transportation, and storage.
Sustainability
In Step 8, the financial viability of the HPU is analyzed, focusing on the payback period and payback
volume. Typical capital investment (CAPEX) for HPU of the said capacity is around Rs 45 lakh, and the
average operating expense (OPEX) is around Rs 55 lakh. In addition, there are some other expenses
which are one time in nature like (i) company registration ;(ii) FSSAI license (iii) brand design and
development (iv) brand registration or trademark (v) staff selection and training. With the wholesale
rate of Rs 150/kg and retail rates of Rs 250 to 300/kg, the operating breakeven is achieved in 1.5 years,

and payback for investments is less than seven years. Cost levers for the HPU are the electricity tariff
of the mini-grid, which is a fixed cost and is pre-determined between the HPU and the ESCO and
purchasing price of raw honey from the beekeepers. It is dependent on the following:
• Number of competing aggregators/processors in the area
• Relative bargaining power of beekeepers
• Quality of honey
• Regularity of procurement
• Providing technical assistance
Revenue levers include:
• Selling price: primarily dictated by the market and depends on the price of honey from other
producers, number of competitors, quality of honey and product and brand differentiation
• Sales: this depends on the intensity of sales/marketing efforts, market/forward linkages and
relationships established and product quality and brand differentiation
Impact of HPU as micro-enterprise

The potential positive impacts that an HPU generate at the village level are:
• Increase in incomes of beekeepers/farmers
• Helping in diversification of livelihoods of farmers thereby reducing their risks.
• Provide direct employment of two to three staff at the unit.
• An HPU operating on renewable energy-based mini-grid can lead to an offset of 30 to 34 tons

of CO2/ year26.
26
a coal plant and does not take into account CO2 from other parts of the value chain.

Annexure 8: Mini Cold Storage
Mini Cold Storage (MCS) can be set up in areas with high production of fruits and vegetables with
short shelf life. For this case study, MCS of the configuration of 4kW, 5 tons, 20x10x8 ft³ size is
considered. The capacity of MCS (usable volume) is considered to be 936 ft³ after accounting for aisle
and racks.
MCS operational model

There could be two business models – entrepreneur-led and ESCO led. In the entrepreneur-led
model, one or two big farmers take the cold storage on rent from the ESCO/supplier and earn
revenues by renting out space to small farmers. (S)he can also buy the cold storage on loan, repaying in
EMIs. In addition to rent/ EMI, the entrepreneur also incurs electricity costs.
In the company-owned model, the ESCO owns and deploys the mini cold storage either near the farms
or at the market (mandi), and employs staff (e.g., an operator) to manage the day to day operations.
Revenue of the ESCO is from renting out space by volume by day; electricity costs are internalized.
Mini-grid
Primary/local
market
Secondary
market
Cultivation and Aggregation Cold Storage
Supply
Figure 8.1: Operational model of Mini Cold Storage
Although the cold storage is operational 24x7, the compressor needs to run only during daylight
hours, and the time for compressor operation depends on operation and kinds of produced stored in
it. During winter months, there is a lesser need for a compressor to be operational. An operational
MCS running at 80% capacity utilization consumes up to 18kWh of electricity, and therefore it acts as
an anchor load.

Key success factors
Several factors determine the commercial viability of an MCS:
Availability of suitable commodities
Presence of a mandi
Organized marginal farmers/

vendors
1. Availability of suitable commodities: availability of suitable agri-produce at a scale having

short shelf life yield high margins with cold storage facility.
2. Organized marginal farmers/vendors: smallholder farmers or fruit vendors in organized
groups to ease the storage of their produce for better margins.
3. Presence of a mandi: were farmers from other villages come for trading the products and
prefer using micro cold storage to store surplus produce
Analyzing MCS based on the ‘5S’ framewrok

Site assessment
Identification of MCS as a micro-enterprise is an outcome of Steps 1 to 3. Analyzing the potential

electricity demand of the MCS suggests that it can act as an anchor load for the mini-grid. In Step 4,
factor conditions of the MCS are analyzed, and it was found that:
• Current Source of electricity: the current electricity supply in the area is plagued by frequent
power cuts, especially during the day may risk the stored commodity.
• Availability of raw material: selection of sites depends on availability of different types of

fruits and vegetables during the different seasons of the year.

In Step 5, the demand conditions for the MCS are analyzed, and it was found that:
• Local and inherent external demand: MCS mainly caters to external demand, and there is
existing unmet demand from nearby urban areas
• Mild competition: there are no small -scale cold storages in the area, and hence competition
for the MCS is absent
• Cost competitiveness: the MCS can provide critical service of extending the life of high-value
perishable produce, thereby reducing losses and ensure higher returns to farmers. It is
expected that and hence can charge for this service
• Presence of alternative and Replacement Cost: No alternatives are present in the area.
In Step 6, an analysis of the growth potential of the MCS is unde rtaken, with the following results:
• High load utilization: as me ntioned earlier, MCS can act as an anchor load for the mini-grid
unit.
• Constant demand: electricity demand is consistent demanding on the availability of the

commodities throughout the year.
• Day load: MCS required mostly electricity supply during day time or operational hours. Night
time load is significantly very low once the desired temperature is set by the compressor.
• Potential for upscaling: MCS can act as an anchor load itself and has a high demand for mini-
grid electricity.
Support Required
In Step 7, an analysis of the support that the MCS requires intensive support is required in terms of
mobilizing farmers/fruit vendors and linking them to the MCS. Also, the benefits that the MCS needs
to be communicated to them in the initial days. There are costs involved in forward linkages as well.
Sustainability
In Step 8, the financial viability of the MCS is analyzed, focusing on the payback period and payback
volume. Typical capital investment for an MCS of the said capacity is around Rs 14.10 lakh, and the
average operating expense is around Rs 3 lakh/year from the second year of operations. The share of
different components of the CAPEX and OPEX is shown in figure 3. With this investment, the
operating breakeven point for such a unit is around 2.8 years, and the payback period of investment is
12-15 years depending upon the business model adopted and kind of produce stored in it.

Cold Storage Unit
and Racks 72.3%
62.5% Electricity
Community
21.3% 13.3% Maintenance
awareness
CAPEX OPEX
Entrepreneur 12.8% Labour

Selection and Training 3.5%
11.5% Rent
Transportation 2.8%
There are two kinds of levers that affect the financial viability of an MCS – cost and revenue levers.
Key cost levers are electricity tariffs and the labor cost of the mini-grid. Re venue levers are capacity
utilization of MCS units and fees charged for different commodities.
Impact of MCS Micro-enterprise

MCSs powered by ESCOs can be financially viable micro-enterprises and can generate the following
positive impacts:
• Reduces distress sale by the farmer and therefore realize better price
• Sustained employment of one to two persons from the local community
• Avoidance of carbon dioxide emissions to the tune of 33 tons per year27.
27
Assumptions: Reduction of CO2 emission per 1 kWh of solar power = 1 kg of CO2 . Please note that the above
a coal plant and does not take into account CO2 from other parts of the value chain read more at
http://www.solarmango.com/in/tools/CO2 -emission-reduction-results/

Glossary
List of Figures
Figure 1.1 A typical solar mini-grid 15

Figure 1.2 Simplified community owned business model 17
Figure 1.3 Private sector-based business model 17
Figure 1.4 DISCOM based business model 18
Figure 1.5 Hybrid business model 19
Figure 2.1 Examples of economic and social usage of electricity 23
Figure 2.2 A typical load curve of a mini-grid site 25
Figure 2.3 Cyclical nature of demand estimation 25
Figure 2.4 Demand progression at a mini-grid site 26
Figure 2.5 Demand generation startegy 27
Figure 2.6 Behavioral change communication framework and objectives 29
Figure 3.1 Site selection framework 33
Figure 3.2 Site selection process 34
Figure 3.3 Snapshot of DES of a hamlet 37
Figure 4.1 Demand progression 43
Figure 4.2 Progression of mini-grid customers on a energy ladder 45
Figure 4.3 Communication channels for customer messaging 47
Figure 6.2 Savings in electricity usage using EEAs 58
Figure 6.3 Reasons for poor adaptation of EEAs 61
Figure 6.4 Change in average energy consumption 63
Figure 7.2 Anchor load 68
Figure 7.3 SPI’s ‘5S’’ framework for new demand generation 70
Figure 7.4 Support cost and electricity utilization and consumption 72
Figure 7.5 Steps for executing the ‘5S’ framework 74
Figure 8.1 Input-output-outcome-impact cycle of impact assessment 86

Glossary
List of Tables
Table 2.1 Customer Segments and usage pattern 24

Table 2.2 Comparing mini-grid with other available sources of electricity 28
Table 3.1 Indicative parameters for site profiling 34
Table 3.2 Sample load assessment 38
Table 4.1 Strategies vis-à-vis customer awareness 46
Table 4.2 Benefits of Mini-Grid over other available sources of electricity 46
Table 5.1 Showing segmentation of commercial motors 53
Table 6.1 Saving in energy bill using EEAs 58
Table 6.2 Cost savings after adoption of EEAs by 30% household in a village 60
Table 7.1 List of potential micro enterprises 76
Table 7.2 Demand Condition check 76
Table 7.3 Demand condition check 77
Table 7.4 Growth potential check 78
Table 7.5 Support required check 79
Table 7.6 Financial viability check 81
Table 7.7 Selection 80
Table 8.1 Indicative approach for measuring the impact 86
Table 8.2 Data collection process 89

Contact
Smart Power India

706, Time Tower, MG Road,
Gurgaon, Haryana – 122002, India
www.smartpowerindia.org
[email protected]

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DEMAND

Guide & Advisor

2. Demand generation strategy for mini-grids .................................................................................21

3. Site selection .............................................................................................................................31

4. Demand generation for existing loads ...........................................................................................41

6. Demand enhancement through energy efficient appliances ..................................................55

7. New demand generation....................................................................................................................65

8. Measuring the impact .........................................................................................................................83

DEMAND GENERATION FOR SOLAR MINI-GRID First Edition | 11

DEMAND GENERATION FOR SOLAR MINI-GRID First Edition | 12

DEMAND GENERATION FOR SOLAR MINI-GRID First Edition | 13

DEMAND GENERATION FOR SOLAR MINI-GRID First Edition | 14

Telecom Tower Institutions

Solar Power Plant

Figure 1.1C : A typical solar mini-grid

DEMAND GENERATION FOR SOLAR MINI-GRID First Edition | 15

Box 1: Why customers choose mini-grids ?

• Quality and reliability of power : mini-grids must ensure dependable, uninterrupted

DEMAND GENERATION FOR SOLAR MINI-GRID First Edition | 16

Donor Implementation partner/NGO

Grant Technical assistance

Government Community owned Minigrid Project developer/EPC

Ÿ Setting & collecting tariff

Government Entrepreneur owned Minigrid

Community Anchor loads

DEMAND GENERATION FOR SOLAR MINI-GRID First Edition | 17

Utility owned Mini grid

Ÿ Operation & running

Figure 1.4: DISCOM based business model

Examples of contractual arrangements that are a part of hybrid models are:

DEMAND GENERATION FOR SOLAR MINI-GRID First Edition | 18

Community Entrepreneur DISCOM

Ÿ Design & installation

Community Anchor loads

Figure 1.5: Hybrid business model

DEMAND GENERATION FOR SOLAR MINI-GRID First Edition | 19

DEMAND GENERATION FOR SOLAR MINI-GRID First Edition | 20

Figure 2.1 : Examples of economic and social usage of electricity

Economic usages Social usages

DEMAND GENERATION FOR SOLAR MINI-GRID First Edition | 23

Table 2.1: Customer segments and usage patterns

Domestic Houses 0.1 – 0.3 Night Lighting, Not enough Meeting

Commercial Flour mill, 2–5 Day Motors, Manual; Introduction

Institutional School, 1-4 Day Light, fan, Conventional EEA

New Oil Expeller 10-15 Day Motor Not enough Introduction

DEMAND GENERATION FOR SOLAR MINI-GRID First Edition | 24

Figure 2.3: Cyclical nature of demand estimation

DEMAND GENERATION FOR SOLAR MINI-GRID First Edition | 25

Figure 2.4: Demand progression at a mini-grid site

Financing and Market Linkage Support

Existing Load Future Load

Basic Lighting Conversion &

Customer Engagement & Load Acquisition (CELA)

Month (0) Month (1) Month (3) Month (6)

DEMAND GENERATION FOR SOLAR MINI-GRID First Edition | 26

Figure 2.5: Demand generation strategy

Buyers Journey Demand Generation Process

Answer and Provoke Questions

Unaware Establish Trust

Decision Handoff to sales