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Implementing Solar Irrigation Sustainably A guidebook for state policy- makers on implementing decentralized solar power plants through PM-KUSUM Components A and C feeder-level solarization with maximum social, economic, and environmental benefits GUIDEBOOK THE ENERGY AND RESOURCES INSTITUTE Creating Innovative Solutions for a Sustainable FutureImplementing Solar Irrigation Sustainably A guidebook for state policy- makers on implementing decentralized solar power plants through PM-KUSUM Components A and C feeder-level solarization with maximum social, economic, and environmental benefits GUIDEBOOKIISD.org iv Implementing Solar Irrigation Sustainably © 2023 International Institute for Sustainable Development Published by the International Institute for Sustainable Development This publication is licensed under a Creative Commons Attribution- NonCommercial-ShareAlike 4.0 International License. International Institute for Sustainable Development The International Institute for Sustainable Development IISD is an award-winning independent think tank working to accelerate solutions for a stable climate, sustainable resource management, and fair economies. Our work inspires better decisions and sparks meaningful action to help people and the planet thrive. We shine a light on what can be achieved when governments, businesses, non-profits, and communities come together. IISD’s staff of more than 200 people, plus over 150 associates and consultants, come from across the globe and from many disciplines. With offices in Winnipeg, Geneva, Ottawa, and Toronto, our work affects lives in nearly 100 countries. IISD is a registered charitable organization in Canada and has 501c3 status in the United States. IISD receives core operating support from the Province of Manitoba and project funding from governments inside and outside Canada, United Nations agencies, foundations, the private sector, and individuals. Implementing Solar Irrigation Sustainably A guidebook for state policy-makers on implementing decentralized solar power plants through PM-KUSUM Components A and C feeder-level solarization with maximum social, economic, and environmental benefits May 2023 Written by Anas Rahman, Siddharth Goel, Akash Sharma, Christopher Beaton, Florian Postel, Kritika Kumar, and Ujjwal Kumar Head Office 111 Lombard Avenue, Suite 325 Winnipeg, Manitoba Canada R3B 0T4 Tel 1 204 958-7700 Website www.iisd.org Twitter IISD_newsIISD.org v Implementing Solar Irrigation Sustainably Acknowledgements The International Institute for Sustainable Development and the Consumer Unity Trust Society International would like to thank everyone who contributed to the production of this guidebook. In particular, we would like to thank our colleagues in the project consortium that supported this publication, particularly Mini Govindan, Rashmi Murali, and Kriti Sharma from The Energy and Resources Institute. We would also like to thank our partners Abhishek Jain and Shalu Agrawal from the Council on Energy, Environment and Water CEEW for their expert advice throughout the project. We would also like to thank the many government officials, financial institutions, distribution companies, and thematic experts who agreed to participate in in-depth interviews and share their advice and experiences. The authors of this guidebook would like to thank the following individuals and institutions for the valuable comments and recommendations that they provided as peer reviewers Abhishek Jain and Shalu Agrawal, CEEW Ashwin Gambhir, Prayas Energy Group Martin Scheffler, Auroville Consulting Mohanaiah Paladi, Former Chief General Manager, National Bank for Agriculture and Rural Development Priya Jadhav, Indian Institute of Technology Bombay Rajan Aggarwal, Punjab Agricultural University Sayantan Dey and Susmita Chatterjee, SwitchON Foundation Akhileswari S. and Rahul Kumar, Ministry of New and Renewable Energy Sudatta Ray, Yale-NUS College Tushaar Shah, International Water Management Institute This publication could not have been undertaken without the generous support of the Indo-German development cooperation project that the Deutsche Gesellschaft für Internationale Zusammenarbeit GIZ GmbH implements on behalf of the Federal Ministry for Economic Cooperation and Development BMZ, including substantive inputs and support from Florian Postel, Kritika Kumar, and Nilanjan Ghose, as well as co-funding from the governments of Denmark, Norway, and Sweden. The opinions expressed and the arguments employed in this guidebook do not necessarily reflect those of the peer reviewers, organizations, and funders, nor should they be attributed to them.IISD.org viii Implementing Solar Irrigation Sustainably Executive Summary The Pradhan Mantri Kisan Urja Suraksha evam Utthaan Mahabhiyan PM-KUSUM scheme, launched in 2019 by the Ministry of New and Renewable Energy, Government of India, aims to transform India’s agriculture sector by improving crop productivity and increasing farm incomes through the solarization of the agriculture sector. This document forms the second part of a guidebook series, providing recommendations to state policy- makers on how they can implement solar irrigation models effectively and sustainably. This guidebook covers Component A and the subcomponent “Feeder-Level Solarization” under the Component C of PM-KUSUM. The previous guidebook addressed Component B and the subcomponent “Individual Pump Solarization” under Component C. An illustration of the different components is provided in Figure 1. Component A and the subcomponent Feeder-Level Solarization under Component C hereafter referred to as Component CFLS of PM-KUSUM involve setting up small-scale solar power plants at the substation level to power rural feeders. These models are relatively new for state policy-makers. Hence the guidebook adopts a comprehensive implementation- focused approach covering four sections 1. Context The what, why, and how of decentralized solar plants, their economic impact on different stakeholders, and the need to view them through a water–energy–food nexus lens to mitigate potential externalities. 2. Financing The financing challenges faced by states, farmers, and private developers that hold back the scheme’s implementation and different solutions to address them. 3. Implementation design and coordination Sustainable approaches of implementation and specific measures to maximize social and environmental benefits. 4. Learning by doing Areas that require on-the-ground experiments to generate evidence for policy formulation and a framework to design such pilots. Context The why, how, and impacts of decentralized solar plants This section deconstructs the decentralized solar plant model for solarizing rural feeders and its potential impact, including benefits to different stakeholdersfarmers, distribution companies DISCOMs, and the state governmentand impact on the water–energy–food nexus. Decentralized Solar Plants A decentralized solar plant under PM-KUSUM Components A and C FLS has a much smaller capacity than a grid-scale solar plant but a much larger one than a typical household rooftop solar system. It is located close to the final consumers and connected to a distribution substation. Components Components A and CFLS are designed with very different objectives. However, the two may overlap under certain circumstances Figure ES1. A state government’s primary policy objective can help determine which component of PM-KUSUM is best to pursue in a specific region.IISD.org ix Implementing Solar Irrigation Sustainably Figure ES1. Areas of overlap between PM-KUSUM Components A and CFLS Source Authors’ diagram based on MNRE, 2019, 2020. Solarizing Agricultural Feeders Solarizing agricultural feeders can provide multiple benefits to farmers and the state government Figure ES2. Figure ES2. Benefits for farmers, state, and DISCOM in solarizing agriculture feeders alsbsai giclfds as’lad ysiabllad , , cb R c chc R c b ch kV F b chbRP IISCOM RPO, PM-KUSUM ISCOM REC x L- b xb S - cb,c c j IISD.org x Implementing Solar Irrigation Sustainably However, there are some issues with the model, most of which can be addressed through better awareness and intelligent scheme design Table ES1. Table ES1. Challenges faced by DISCOMs in solarizing agricultural feeders and potential solutions Concerns Solutions Seasonal fluctuation in agricultural load The key to avoiding upstream power flow during the non-irrigation season is optimal targeting and sizing of the power plant. Sizing should consider the base load requirement of the substation. Higher cost than utility-scale solar plants Although utility-scale solar plants offer cheaper power, their growth has inherent limitations, and decentralized power plants can play a complementary role. Further, some cost advantages of utility- solar plants are due to temporary incentives, such as the interstate transmission system waiver. Impact on daily load management Shifting agriculture load to the daytime is the most cost-effective means of load management as the share of solar power increases in the grid. States can use PM-KUSUM to plan the long-term transition of agricultural power. Excess contracted capacity Cost-benefit studies show that even if it takes a few years for the demand to exceed contracted capacity, there is a benefit to states from PM-KUSUM. Source Authors. Impact on Water The impact of solarizing agriculture feeders on groundwater sustainability and water markets is not well studied. However, past experiments on improving electricity access show that when the local hydrogeology is suitable, and water is the primary constraint to increasing crop production, then there is a strong possibility of increasing groundwater use, reiterating the need for careful scheme design. Preventing Groundwater Depletion Cost-reflective electricity pricing is the long-term solution to address groundwater concerns. However, if states cannot implement it due to political sensitivities, they should consider other strategies to address groundwater concerns. PM-KUSUM guidelines offer a framework for states to consider demand-side management by providing direct incentives for farmers to stay within a stipulated benchmark electricity consumption limit, potentially preventing groundwater depletion. There are advantages and challenges to this model Table ES2.IISD.org xi Implementing Solar Irrigation Sustainably Table ES2. Pros and cons of direct water incentives mechanism Advantages Challenges It is voluntary and based on incentives that make it more politically feasible. It does not require the participation of all farmers in the feeder. However, the higher the participation, the better the potential outcomes. Identifying the appropriate benchmark consumption limit or quota. Participation of tenant farmers due to their lack of electricity connection. Financial and capacity burden on the DISCOM to implement direct incentives. Source Authors Case Studies Two case studiesone on Mukhya Mantri Saur Krishi Vahini Y ojana MSKVY of Maharashtra and the other on the Paani Bachao Paisa Kamao PBPK scheme of Punjab are provided in the Appendix. MSKVY is the most successful scheme for feeder solarization and provides valuable learnings for the PM-KUSUM. The PBPK scheme is the largest direct incentives scheme for water conservation. Financing Financing is linked with different aspects of the scheme, and any risks and opportunities affecting the scheme are reflected in ease of financing. Hence, this section uses financing as an anchor to investigate challenges facing investment in the scheme and recommends measures to overcome them. Financing remains the biggest challenge to the scheme’s success. There are two ways to boost investment By reducing the risk perception of the scheme By increasing tariffs to make returns more attractive to the farmer/developer. Three key concerns lead to a higher risk perception of the scheme among developers. Some proposed solutions that states can adopt to address these concerns are as followsIISD.org xii Implementing Solar Irrigation Sustainably Table ES3. Key concerns on distributed solar power plants and proposed solutions to mitigate them Concerns Solutions Concerns about poor grid infrastructure Developers suggest that the safeguards recommended in the PM- KUSUM guidelines for grid availability do not fully allay their concerns about the likelihood of outages due to the poor state of rural feeder infrastructure. Incorporating “deemed generation clauses” into the power purchase agreements. Undertaking grid upgrading at the distribution level, potentially through convergence with the Revamped Reforms- based and Results-linked Distribution Sector Scheme. Although Component C FLS mainly targets segregated feeders, states can opt for virtual feeder segregation in places where physical segregation doesn’t make economic sense. Concerns arising due to operational and regulatory costs Developers face a challenge in identifying and leasing affordable land for setting up a solar plant and the transmission and evacuation infrastructure. Another key challenge is related to land revenue regulations, including the timely application of land- use regulations restricting land transfer in certain conditions. Facilitating interactions between potential developers and landowners. This fa