Remote Microgrids in the Himalayas Offer Lessons for the Rest of Us

Turns out that some of the world’s most remote microgrids offer lessons useful to the rest of us, as Alexander Hogeveen Rutter, professional engineer, explains in this article about the Global Himalayan Expedition’s work.

remote microgridsThis year, Global Himalayan Expedition (GHE) continued its success by electrifying Shadé, one of the most remote villages in the Zanskar Valley and perhaps all of India. The team, representing over 13 countries, trekked over 60 miles to reach the village.

While the electrification was impressive in its own right, there are lessons to be drawn for microgrid proponents everywhere. 

Lesson 1: Social entrepreneurship can (and does) work

People are often surprised when hearing GHE is a social enterprise, not a not-for-profit. However, I have witnessed first-hand the advantages and cost savings of working as a business. In remote areas without mobile communication, decisions must be made quickly to ensure the safety of the team. Additional regulatory requirements would put these processes at risk.

As a social enterprise, there is a need to create a self-funding, sustainable business model. Social enterprises cannot blindly install what donors want, but work with the recipients (aka customers) to determine what works best. Rather than an endless pot of donor money, GHE must actively seek partnerships. If anything, there is probably even more opportunity for co-branding with corporate sponsors.

Perhaps most importantly, as a social enterprise on a very tight budget, there is a strong incentive to minimize costs and generate value for money. Interestingly, the need to save money arguably drives better, more localized development.

Lesson 2: Develop local talent

While the trip to Shadé helps generate press and therefore partners, GHE is electrifying over a dozen villages in 2017. Unlike many non-government organizations with expensive foreign expats and consultants, GHE makes this happen by developing local talent.

The vast majority of installations are completed by local electricians working for GHE, some of whom were cooks prior to joining GHE, who speak the local language, have the knowledge and skills to quickly navigate the harsh terrain, and have a vested interest in the development of their communities and region. In every village, at least one local is trained to maintain the batteries and panels. Not only is someone using the system most committed to maintaining the equipment, this also saves the extraordinary expense of sending someone from a distant city.

Similarly, GHE, through a locally identified entrepreneur, operates a service center shop in Leh where those with installations can service their microgrids, purchase replacements and upgrades. The shop also has two local women as service engineers who have been trained at Barefoot College in India. Not only are there spin-off employment benefits to the local community, the development of locals minimizes GHE’s costs and engenders a strong sense of mutual respect. It helps to get away from the utility mindset into one that maximizes local value.

remote microgrids

Photo Credit: Rolf Harrington

Lesson 3: Adapt your business model

Too often, microgrid organizers talk about competing directly with utilities, but retain a utility mindset for revenue generation and costs.

Traditional utilities tend to charge on a per kilowatt basis, a reflection of the historical costs associated with fossil fuel consumption, which scaled for every kilowatt used. However, for a wind, solar, or small hydro system with effectively zero marginal costs, this model no longer makes sense.

Instead, a monthly connection fee should be charged, to recoup a reasonable rate of return on the initial capital investment (for a social enterprise or non-profit, sponsorship may mean the rate of return is actually below the cost of capital).

Charging a monthly fee better matches revenues and costs and is more predictable for both the provider and consumer. Perhaps most importantly, it eliminates the extra costs associated with meters (the physical meter itself, meter reading, fraud detection, etc.).

Many otherwise economically viable small connections become non-viable when these ‘overhead’ costs are included. The model of eliminating this overhead is applicable everywhere. In GHE’s case, there is a nominal fee of 100₹/month (about $2 USD), which is invested in a fund to replace the system. Though the battery systems are projected to last five or more years, some customers have already saved up enough to cover the replacement cost in two to three years. This extra revenue can be invested elsewhere.

remote microgrids

Photo Credit: Rolf Harrington

Capturing economic benefit

While almost everyone recognizes the economic benefit of electrification, it is often difficult to capture that benefit. Mountain Homestays, the livelihood initiative of GHE, seeks to help locals directly capitalize on the newfound benefits of electrification. One or two nights of homestay revenue is enough to fund the connection fee for an entire year. Other sources of revenue include local crafts and organic produce. By helping customers generate revenue from their new electricity, entrepreneurs can ensure they are paid for installing remote microgrids.

In this case, the social enterprise now depends on tourism as its major revenue source to sustain and scale itself. Combining tourism with energy access supports the enterprise with a sustainable business model and the rural community with sustainable development.

One final way to both minimize costs and maximize the environmental benefit of microgrids is a focus on minimizing consumption. GHE provides 3 W LED bulbs with their microgrids, which means that a 250 W panel and two 100 Ah batteries is sufficient for multiple homes. While DC microgrids like GHE may not be practical in every setting, the overall ethos of helping customers minimize consumption can be an active part of a microgrid installation. This is also made possible by charging a fixed cost, as opposed to the per kWh business model of the utility, which creates an inherent conflict between energy efficiency and utility profitability.

Remote microgrids can be installed in a way that is both economic and socially conscious. Global Himalayan Expedition illustrates one viable business model, but there are lessons for purveyors of microgrids everywhere.

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Comments

  1. The problem I am seeing with a connection fee in Massachusetts is that the Big Utility wants to charge such a high connection fee (in addition to still charging for the actual usage) that low income people are priced out of being connected to the grid. Also, people who reduce their electricity use are penalized by having to pay such a high connection fee. And finally, it incentivizes grid defection (people leaving the grid altogether) which takes away the many benefits of having solar on the gird.

    As a side note – I do wish you wouldn’t feel the need to claim non-profits are wasteful, evil organizations. Some of us squeeze every penny, provide local employment and job training, and do a really good job without wasting people’s money. It is hard to read an article when you are being insulted at the same time.

    • Hi Jane:
      Alex (the author) here. To provide a little context for my discussion of fixed vs. variable monthly costs, keep in mind I’m talking about those with low incomes globally, who don’t currently have access to a grid at all, not those in a wealthy country with grid access.

      A monthly fee for a microgrid can actually be much lower than the monthly fee for a grid connection (assuming a grid connection is even available) as the system size can be scaled to what the customers can afford. In this case, the electricity was fairly bare bones, but modular enough that the customers could add more panels/batteries/appliances as they can afford them. For many people without grid access, the alternative is kerosone or diesel power, which is much *more* expensive, but they don’t have the capital to install a microgrid themselves. This business model allows for predictable, monthly payments that are less than what they were paying for fossil fuels.

      I certainly don’t believe non-profits are evil, though they can certainly be wasteful if they do not fully understand the needs of their recipients (eg. PlayPump). In this specific case, GHE would not have been able to do the amazing work it does if hamstrung by regulatory requirements-the decisions are simply too critical, and too quick and the environment too harsh and too remote. That doesn’t mean there isn’t a role for responsible, thoughtful non-profits such as yours in the microgrid space more generally.

  2. Richard Ganton says:

    Jane, he never said that non-profits are wasteful, evil organizations. However, I have had experience with church’s helping others by sending teams of people who don’t know the language, and can’t engage in any really meaningful work, for 1 week at a cost that would hire tens of the local people to do a far better job for a year. Yes, a lot of NGOs and charities and Churches do good work but there are many who seem more interested in participating in helping the poor rather than in actually helping the poor so they don’t need your help any more. Haiti is an unfortunate example of that with too many NGOs doing things for Haitians and not trying to work their way out of a job.

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