Program on Energy and Sustainable Development Working Paper #77
July 8, 2008
Much existing literature champions renewables implementation on India’s Sagar Island as an unqualified rural electrification success story. Photovoltaic (PV) and wind systems put in place by the West Bengal Renewable Energy Development Agency (WBREDA) have clearly brought benefits to many of the island’s residents.
The highly-touted community management system governing the projects has been successful at instilling local pride and overcoming the traditionally thorny problem of tariff non-collection. At the same time, an on-the-ground look at the Sagar Island experience identifies some deeper liabilities of the business model guiding the renewables projects. Two of the ostensible strengths of the Sagar Island implementation – the harmonious tariff collection associated with community management and the resources, competence, and assertiveness of WBREDA itself – can at the same time be considered weaknesses limiting the scope, sustainability, and replicability of the projects.
This working paper considers these questions through a case study of a typical Sagar Island facility, the Mritunjoynagar PV power plant. It finds that Mritunjoynagar’s inability to recoup its full operating and maintenance costs by providing appropriate incentives for profit maximization limits the expansion of the project and threatens its long-term sustainability, or at least the relevance of its business model in the absence of a highly-visible champion like WBREDA to ensure continued support. For WBREDA and other agencies to sustain and replicate similar projects—and their attendant benefits—throughout India, they must adjust their economic model, as WBREDA is beginning to implicitly acknowledge in exploring a franchise model for future efforts.