Opinion piece by Himanshu Mishra – Vice President, Regulatory Affairs & Project Development, SunSource Energy
Economic Advantage of Agriculture
Globally, the importance of agriculture to the GDP contribution is significant enough to pay attention to it and it surely can’t be ignored. Whenever there has been a GDP growth, the growth of agriculture has paid its value in the prosperity of the country’s economy. The figure below reflects the contribution of Agriculture to the Global GDP over the years.
Source: World Bank Data
As far as the Indian economy is concerned, it is known as an agrarian economy because of the sizeable contribution that comes from agriculture. Though the figure below reflects the declining contribution, primarily due to a shift in the economic factors by increasing the importance of other variables, however, it still reflects the importance of agriculture to the economic growth of the country.
Source: World Bank Data
Land Use challenge for India
Agriculture determines the bio-diversity, health, and quality of water, whereas, conventional sources of electricity in the country, that are primarily dominated by thermal based sources, result in exacerbating the climate change effect on the Indian economy, which may severely affect the holistic economic growth in the long run. The arable land across the globe is on the decline due to various issues and this creates a challenge to the Indian food system along with degradation and erosion of arable land with an increasing population. As per World Bank estimates, during the past 50 years, the arable land in hectares per capita in the Indian subcontinent has declined from 0.317 in 1965 to 0.118 in 2016. (Please refer figure below)
Source: World Bank Data (Last updated in Oct 2019)
India is blessed with a variety of clean renewable energy alternatives including wind, solar, biomass, small hydro. However, the sound solar irradiation data and PV potential identified across the country to make solar as the most lucrative option to be capitalised for the promotion of renewable energy. (Please refer the figure below)
Source: Global Solar Atlas (last updated on Oct 2019)
Land is already a scarce resource in India, with its demand ranging from farmers, industries, commercial and service institutions and the Government. Now, another stakeholder to this limited pie is getting added and the viability of the solar projects heavily depends on the cheaper land near to the load centre or point of evacuation irrespective of the fact that such a land is arable or barren.
As per one report by National Renewable Energy Laboratory, the land use requirements for PV and CSP projects are as per table below:
Source: Global Solar Atlas (last updated on Oct 2019)
The above- mentioned estimates hold true to a large extent for solar projects in India as well. Increased demand for land is being met through the diversion of agricultural or forest land. This creates a conflict between the overall objective of Sustainable Development Goals (SDG) of the United Nations as on the one hand promotion of renewable energy helps meeting SDG 7 and SDG 13 to take action against climate change and ensure access of affordable clean energy but on the other hand, denies achieving the objectives of SDG12 and SDG15 which solicits to ensure the sustainable consumption and the production, and requires to promote the sustainable management of forest and combat desertification and prevent biodiversity loss.
With the increasing population, the demand for foods and energy is increasing multi-fold and thus also the use of fossil fuels. As per one estimates to meet the national target of 100 GW solar capacity addition by 2022, with a conservatively assumed land use for ground- mount PV projects of 1.65-1.8 acres/MWp, the total land requirement of land would be around 1.61 lakh hectares. This corresponds to more than the area of Mumbai city. Land acquisition is a highly sensitive subject both economically and socially and it is no longer true that most of the power sector projects get delayed primarily due to land acquisition.
One possible way forward to overcome this conflicting interest in land use is AGRIVOLTAICS – combined agricultural use of land with the production of electric energy by photovoltaics. It provides solutions for the production of food crops and, at the same time, electricity generation under consideration of soil protection and water savings. This can increase the sustainability of food, water, energy, and climate at the same time meeting the SDG objectives of the United Nations.
Fraunhoffer Institute was the first who coined the concept behind Agrivoltaic in 1981, which were known as then known as Horticulture PV. While the idea dates back 35 years, however the significantly high cost of solar PV modules made this only part of a theoretical or scientific experiments only. However, with the jaw-dropping prices of solar modules, the advent of advanced solar technology solution options, the Agrivoltaics got its revival across the globe.
Opportunities for India
GOI Effort for Doubling Famers Income
As per the NSSO data on Consumption Expenditure Survey for FY 2011-12 suggests that 1/5th of rural households with self-employment in agriculture as primary occupation were having income less than the poverty line. Farmer’s income is significantly less than those working in the non-agriculture sector. This disparity started the migration of rural households from agriculture to low skilled jobs in urban areas and further increased the population growth in urban areas.
Low absolute income level, as well as large and deteriorating disparity between farmer’s income and non-agricultural worker constitute an important reason behind agrarian distress in the country. Realising the need to pay special attention, the goal of doubling farmer’s income by 2022 was set by the Prime Minister of India to promote the farmer’s welfare, reduce agrarian distress, and bring parity between the income of farmers and those working in non-agricultural professions. Government of India has set a target to double the farmer’s income until FY 2022-23 over the base year of FY 2015-16, which requires annual growth of 10.41%. The areas of attention under the aforementioned agenda was crystallised as in the figure below:
As per Niti Ayog, the policy roadmap identified GOI has the proposed following:
From the aforementioned, it is profusely clear that there is a pressing need to preserve arable land and promote agricultural activities so that the goal of doubling farmer’s income by 2022-23 is met.
Linking Solar to Agriculture
Agriculture belongs to the consumer category which is least preferred by the electricity utilities across the countries. Low agricultural and rural sector revenues have led State electricity utilities to view agricultural consumers as a liability. As a result, some States now see de-facto ‘de-electrification’ that includes rationing, low-quality electricity delivery, and poor supply quality such as voltage fluctuations, frequency, low voltage, frequent interruptions, and phase imbalances that have hit rural areas with substantial economic costs in both farm and non-farm sectors.
However, the scenario fast- changing with GOI commitment of 24×7 electricity supply. This paves the road for coerced electricity supply to the rural areas by the electricity utilities. This is to be noted that for each unit of electricity to be sold at agriculture consumer which is at the bottom of the supply pyramid, the DISCOM needs to purchase the same energy grossed up with the aggregate transmission and distribution losses and this results in significantly higher electricity purchase at generation end, meaning thereby in case the T&D losses are 29% then to supply 1 unit of electricity at agriculture end, DISCOM may need to purchase 1.29 units at generation end. This leads to an additional cost burden for which there is no revenue and this gap further widens when the states directs regulatory commission to subsidise the agriculture and do not pay the subsidy to DISCOM upfront.
Solar Rooftop at agriculture end not only creates a win-win for DISCOM but also to the farmers as this ensures the electricity supply for their irrigation need and at the same time no commercial losses for DISCOM. With remaining electricity left from supply to agriculture, the same may be supplied to meet the demand of C&I segment which are paying consumers for DISCOM and this helps in improving their finances. The benefits accrued to both DISCOM and consumer may be reflected in the figure below:
Figure 7: Benefits of Rooftop Solar PV to DISCOM and Consumer
Internationally the Agrivoltaics has resulted in a scalable model enhancing not only the farmer income but also befits into the distributed solar PV generation model which helps the DISCOM to avoid the cost burden. However, the business model to achieve commercial scalability must be ensured by the constant revenue stream for a period at least matching with the debt repayment period, which at present is missing in prevailing policy and regulatory framework dealing the solar PV. Without cash flow, project financing of such projects by private players would not be possible.
In addition, the solar installation permissible at the arable land could be more than the actual requirements or during the fallow farm season, there won’t be any utilisation of electricity generated or the solar PV system need to be disconnected.
There is a need to integrate the Rooftop Solar PV target with the doubling of the farming income goal. Both the ministries dealing in solar and agriculture may create a joint fund under the policy recommendation of Niti Aayog for ‘Promoting responsible agriculture investments’, either as a grant or subsidy to encourage farmers to adopt solar PV on their arable land. This will not only help in accelerated capacity addition under the Rooftop Solar PV but also help in increasing farmer’s income.
MNRE may consider allocating specified budget allocation under the KUSUM scheme to promote the Agrivoltaics.
Respective states may encourage Agrivoltaics based pilot projects across their districts to create awareness.
The state electricity regulatory commissions may provide a regulatory revenue stream to support the financing of the Agrivoltaics in their states. Respective states may amend their Grid interactive regulations or Net Metering regulations to recognise Agrivoltaics as Prosumers and eligible for net metering benefits.
This will lead to benefits such as Agrivoltaics projects to continue generating solar electricity during the fallow season as well and the same if not consumed locally may be banked with the DISCOM to provide credit adjustment to offset their electricity bill at night. To enable this, SERC may consider enacting Virtual Net metering based adjustment for agricultural consumers or village or feeder based adjustment of solar energy and consumers connected to the same. Any surplus unadjusted power may be deemed to be consumed by the DISCOM which may consider offsetting their Solar RPO requirements and would require to pay such Agrivoltaics a tariff which respective SERC may determine.
The Cooperative society or rural corporation based electricity generation and supply may be permitted by SERC as deemed consented business model as the regulatory cost and time involved in the operation of such models may get discouraged.
The Government may allow organizations to raise finance on the aggregation of Agrivoltaics based projects from financial institutions under agriculture loan, however, the limit shall for the same may be allowed under RBI priority sector lending for Renewable.
By Himanshu Mishra- Vice President, Regulatory Affairs & Project Development, SunSource Energy