Making Sense of KUSUM

Martin Scherfler

The agricultural sector accounts for about 80% of the country’s ground water extraction and for about 20% of the country’s electricity consumption. As electricity for this sector is either free or highly subsidized, there is no incentive to the farmer for using water and energy resources efficiently. The DISCOM in turn is reeling under the subsidy burden and provides low quality electricity supply to agriculture characterized by unreliable supply hours, long outages, and high voltage fluctuations etc. This has an effect on agricultural productivity and ground water extraction.  

The recently announced KUSUM scheme by Ministry of New and Renewable Energy (MNRE) attempts to address some of these issues related to power supply for agriculture. KUSUM has three components. Component A aims at setting up 10,000 MW of decentralized ground solar or other renewable power plants. Component B introduces 17.50 lakh stand-alone solar agriculture pumps and Component C aims at solarisation of 10 lakh small scale solar plants connected at the agricultural electricity service connection of individual farms. 

Component A

Component A promotes distributed solar energy generation with a solar plant capacity of 500 kW to 2 MW. As per MNRE guidelines the solar plant requires a dedicated evacuation infrastructure (feeder). A competitive bidding process for tariff determination, with a ceiling tariff as per latest solar energy tariff order of the respective states, is being proposed. Waste land and degraded land shall be identified and leased from farmers. If agricultural productive land is utilized the co-location of solar energy production and crop cultivation is recommended, this will require elevated structures and a more dispersed solar array arrangement to permit sufficient sun light for crop cultivation. 

The promotion of distributed renewable energy generation (DREG), solar and other renewable, is a welcome move. The requirement for a dedicated feeder for evacuation of electricity generated by the DREG results in unnecessary infrastructure costs and occupies valuable DISCOM substation bays.  

 One key advantage of distributed solar energy generation is the fact that production and consumption of electricity occur at the same location, or in close vicinity to each other, thereby reducing T&D losses and optimizing the utilization of existing electrical distribution infrastructure. 

The proposed competitive bidding process for tariff determination proposed is unlikely to attract any bidders, as the capital cost of smaller renewable generators is typically higher than the capital cost of larger systems. One alternative approach is that the locational value of distributed generation, in particularly the avoidance of transmission (and distribution) losses, may be priced and used to provide an incentive to the generator in addition to the solar tariff. The DISCOM and the generator may share the savings on transmission (and distribution) losses. 

Component C

KUSUM Component C promotes grid-connected solar for agricultural service connections. The guidelines recommend a) size the solar system in kW at twice the pump’s capacity in kW, b) solar energy generated to meet the electricity required for irrigation needs and the surplus solar energy  to be injected into the grid, c) DISCOMs will purchase excess power from the farmer at the rate decided by the respective state, d) the central financial assistance (CFA), a 30% capital subsidy & 30% state subsidy with the remaining capital  10% will be from the farmer and 30% debt financing, is limited for pumps of up to 7.5 HP. A domestic content requirement for the solar system components is mandatory. The guideline also recommends to give priority to farmers already using micro-irrigation systems or those, that are about to adapt micro-irrigation in order to minimize water usage and energy consumption for irrigation. 

As electricity is free of cost for the agricultural consumers, the suggested financing model (with a 40% contribution by the farmer) are unlikely to work. The farmer simply has no incentive to invest into solar energy generation, despite the capital subsidy provided. Alternatively, a third party may invest into the solar system and sell the gross-generated solar energy to the DISCOM. In order to make this approach acceptable to the farmer, a ‘solar farmer incentive’ designed to motivate the farmer to reduce its water and electricity consumption can be introduced.

The attempt to converge KUSUM with ongoing micro-irrigation and efficient pumps schemes presents a great opportunity to improve water and energy efficiency. However, the guidelines are silent on how this will be achieved, and there may be a great risk that the proposed convergence will be ignored altogether. This presents a severe risk factor in further increasing ground water extraction on account of agriculture.

Conclusion

What KUSUM promised to deliver is:  an income increase and reliable day-time power supply for the farmers, the promotion of DREG, and a reduction in the cost of electricity supply. While KUSUM presents a healthy initiative in turning the challenges related to free or subsidised electricity supply into an opportunity towards water and energy security, the current guidelines appear to be not well-thought out. Some elements in the guidelines, such as the insistence on a dedicated feeder and the tariff setting for competitive bidding in Component A, or in the case of Component C the investment recovery model for the farmer and the lack of strategy for interdepartmental coordination to ensure that water conservation technologies are fully integrated, are risk factors and gaps that may not allow the scheme to deliver on what is has promised to do. Though it will be finally the responsibility of the various states to design and implement state specific implementation models, these gaps may need to be addressed at the central level. 

Auroville Consulting
a unit of the Auroville Foundation

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