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Clean Energy Innovations to Boost Rural Incomes

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October 2018 |

Citation: Sanchit Waray, Sasmita Patnaik, and Abhishek Jain (2018) 'Clean Energy Innovations to Boost Rural Incomes', October.

Overview

Ninety-two per cent of the electricity-deprived population of India lives in rural areas. Farm power availability is a third of that of China. More than four million rural micro-enterprises in India mention lack of reliable electricity as a major bottleneck to their business. Clean energy innovations for farm and non-farm micro-enterprises can bridge gaps in the centralised electricity supply system and power income-generating activities in rural areas. This study by the Council on Energy, Environment and Water, envisions to maximise the role of clean energy as a catalyst for increasing rural incomes.

Key Highlights

  • Significant market opportunity exists in India’s rural economy for mechanisation through clean energy innovations. For instance, in farm sector, merely three activities – pesticide spraying, rice transplanting, and harvesting of grain crops – have a total market potential of about USD 40 billion.
  • Beyond agriculture, clean energy innovations have a market potential of 13 billion USD, which could transform enterprises engaged in activities such as custom tailoring, food processing, poultry, and livestock rearing among others.
  • We found merely 20 odd livelihood appliances, which can effectively run on decentralised renewable energy (DRE). These include innovations such as solar pumps, solar-powered milking machines, milk chillers, sewing machines, solar charkhas, cold storage, and knapsack sprayer. Their deployment is limited to a few hundreds, in comparison to millions of farmers and rural microenterprises in 600,000 villages of India.
  • Energy efficiency is critical to make DRE-based livelihood applications economically viable. However, existing livelihood appliances prevalent in rural areas are not designed for efficiency, but for unreliable and subsidised/flat-priced electricity.
  • The farm sector market is more difficult to capture than the non-farm due to low utilisation rates of agricultural equipment and the CAPEX-heavy nature of DRE solutions.
  • Reduction in battery costs and development of cost-effective, super-efficient, small-sized motors could significantly improve the economic viability of DRE.
  • The market for smaller livelihood solutions is significantly fragmented and cluster-based, potentially requiring hundreds of small and medium scale enterprises to capture the same.
  • Customer awareness and financing are major barriers to adoption of clean energy solutions for livelihood applications.

Proportion of micro-enterprises reporting electricity access among the top two bottlenecks to their business

Source: Ministry of Statistics and Programme Implementation (2017) “Key Indicators of Unincorporated Nonagricultural Enterprises (Excluding Construction) in India, 2015-16.” New Delhi: Government of India.
https://gramener.com/indiamap/

Note:  This map depicts districts with rural micro-enterprises reporting unreliable electricity among the top two bottlenecks to their business. The colors in the legend indicate the proportion of such enterprises in a particular district.

The significant market opportunity is impeded with major gaps in the entrepreneurial ecosystem to support development and deployment of clean energy innovations in livelihoods. Following are the challenges, categorised at each stage of the product’s life cycle.

Key gaps in the innovation ecosystem

Concept to prototype

  • Lack of financial support: Given the high-risk nature of the product development process, there is a dire need for capital grants from philanthropic and public funds.
  • Inadequate physical infrastructure: The pace of intervention is slowed due to limited access to fabrication labs and other such facilities where prototypes could be built and products could be tested.
  • Lack of policy clarity: There is no clarity regarding the role of DRE along with the grid supply leading to business uncertainty for entrepreneurs. This affects the innovation ecosystem and the inflow of financial support for DRE-powered products.
  • Limited cost incentives: Due to subsidised electricity rates in rural areas, the cost incentives for developing energy-efficient productive use appliances are limited. Improving energy efficiency of appliances will be critical to improving the economic viability of DRE-powered products.

Prototype to pilot

  • Lack of adequate knowledge of valuation of technology: The process of technology valuation is not well-developed in government institutions, limiting technology transfer from public research institutions.
  • Limited collaborations: Collaborations between larger businesses and smaller entrepreneurs has remained limited. Such collaborations at the right stage can lead to improvements in the design and efficiency of the product, and thus its commercial viability.
  • Lack of business skills: Innovators may have the technical skills, but many may not be adept at skills such as marketing, strategy, or finance required to get the product off the ground.

Pilot to commercial product

  • Limited access to affordable market research: Access to up-to-date market research information is critical for the development of DRE-powered appliances and machinery, but conducting such market research is an expensive exercise for early stage enterprises.
  • High capital cost of DRE: The high capital cost of DRE is one of the biggest impediments to adoption by customers when compared to low capital cost of diesel-powered equipment.
  • Aligning product designs with customer needs: Product demonstrations and processes to incorporate consumer feedback during the design phase are crucial to improve user acceptance.

Commercial product to large-scale deployment

  • Low-utilisation rates: Given that DRE-powered products require high-capital investments, the utilisation rate of the asset is a key determinant of its economic viability.
  • Low adoption of energy efficient appliances: Energy efficient livelihood appliances, owing to their high prices and low sales volumes, are not prioritised by distributors of durable products.
  • Barriers to accessing loans: Lack of collateral on the part of the end consumer creates impediments to accessing loans, which limits the scale of adoption under a direct-purchase model.
A market opportunity of over USD 50 billion exists for clean energy innovations powering livelihoods in rural India.

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Access to Clean Cooking Energy and Electricity Survey of States

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September 2015 |

Citation: Abhishek Jain, Sudatta Ray, Karthik Ganesan, Michael Aklin, Chao-Yo Cheng, and Johannes Urpelainen (2015) ‘Access to Clean Cooking Energy and Electricity: Survey of States’ CEEW Report, September

Overview

The Access to Clean Cooking Energy and Electricity – Survey of States (ACCESS) is India's largest energy access survey, covering more than 8500 households, 714 villages and 51 districts, across the states of Bihar, Jharkhand, Madhya Pradesh, Odisha, Uttar Pradesh and West Bengal. The first ACCESS survey was conducted in 2015.

The ACCESS study is the result of an expansive data collection process, lasting over 12 months and resulting in the collection of over 2.5 million data points. It provides a first-of-its-kind multi-dimensional evaluation of the state of energy access in India and highlights the multiple nuances associated with electricity access, such as the duration of supply, quality, reliability, affordability and even the legal status of electricity connections.

Conducted by CEEW in collaboration with Columbia University, with support from the Shakti Sustainable Energy Foundation, ACCESS provides a holistic approach to analyse the deep distress in rural India due to poor electricity access and serves as a handbook for all discussion on this topic. ACCESS has supported policymakers develop region and district-specific solutions, thereby making government programmes for expanding electricity access more effective.

Maintenance work on solar street lighting in Koraput, Odisha (Source: UK Aid)

Key Findings

On Electricity Access

  • Even though 95.5 per cent villages were electrified, only 68.6 per cent of rural households had electricity connections across the six states.
  • Only half the rural households surveyed received electricity for more than 12 hours a day. This was as high as 97.5 per cent for West Bengal and as low as 23.5 per cent for Uttar Pradesh.
  • Proportion of rural households that received four or more hours of evening supply varied from 93 per cent in West Bengal to more than 70 per cent in Madhya Pradesh and Odisha to less than 30 per cent in Jharkhand, Uttar Pradesh and Bihar.
  • Sixty-five per cent of electrified households faced at least one black-out day in a month.
  • Sixty-four per cent of electrified households in Bihar used kerosene as a primary lighting source.
  • For a lifeline consumption of 30 units/month, unmetered households were paying more than metered households.
  • Even a household electricity connection did not guarantee its use as a primary source of lighting; 46 per cent of households having electricity connections had severe issues in terms of supply quality and duration.
  • A significant lag existed between the time a village was first electrified and when the households got electrified. This varied from a median lag of 25 years for a rural household in Odisha to 15 years for households in Madhya Pradesh and Uttar Pradesh to only two years in Bihar and Jharkhand.
  • Nearly a third of the households expressed preference for a micro-grid over regular grid.
  • Nearly 80 per cent rural households expressed a preference for a subsidy on solar lanterns in lieu of subsidy on kerosene.

Electricity access index for six states

Source: CEEW analysis, 2015

On Cooking Energy

  • Despite 22 per cent of rural households having an LPG connection, 95 per cent of rural households across the six states continued to use traditional fuels such as firewood, dung cakes and agricultural waste for cooking, resulting in prolonged exposure to the health hazards posed by indoor air pollution.
  • For nearly six per cent of rural households, amounting to nearly 22 million people, the severe lack of fuel availability adversely impacted the amount of food cooked.
  • In Uttar Pradesh, nearly 70 per cent of the households had to buy a part or all of the biomass required for cooking. Across the six states, 56 per cent of the households had to do the same.
  • Median monthly expenditure of households that buy traditional fuels (INR 563) was more than that of households that relied exclusively on LPG (INR 385).
  • Ninety-five per cent of households cited affordability of LPG connections as the main limiting factor to not adopt LPG. Other major barriers were high recurring costs and lack of LPG distribution in rural areas.
  • The median distance that a typical rural household had to travel (one way) to get their LPG cylinder was 6 km. The median distance varied from 3km in West Bengal to 11km in Madhya Pradesh.
  • Of the households having no LPG connection, nearly 40 per cent were unaware about the subscription process. This lack of awareness was more prevalent in Bihar and Odisha.
  • Over one-third of the households were not aware (or did not believe) that using LPG over a traditional chulha could have positive health benefits.
  • Only 11 per cent of the households that used the chulha reported finding it convenient and easy to use.
  • Less than one per cent rural households used improved cookstoves (0.74 per cent) and biogas (0.21 per cent) for cooking.

Clean cooking energy access index across six states

Source: CEEW analysis, 2015

The ACCESS Survey report was launched in New Delhi in September 2015 by the Minister for Power, Coal, and New and Renewable Energy, Piyush Goyal. Delivering the keynote address, he said, “In urban India, we often take electricity for granted without realizing the poor state of electricity access faced by large parts of rural India. Though 96 per cent of villages are electrified, it is crucial to note that this does not equal to electrification of the households. Rural citizens today demand quality electricity to light their homes, use fans, charge mobiles and provide a conducive environment for the education of their children.”

ACCESS found that despite 96 per cent of villages in India being electrified, only two-thirds of rural households have a connection and only half of them receive more than 12 hours of power a day.

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Reforming Kerosene Subsidies in IndiaTowards Better Alternatives

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April 2016 |

Citation: Abhishek Jain, and Aditya Ramji (2016) ‘Reforming Kerosene Subsidies in India: Towards Better Alternatives’, April

Overview

This study explores how to rationalise the kerosene subsidy to improve government effectiveness, as well as provide the maximum benefit to the households spending on the fuel. Kerosene has been continued as a subsidised fuel to provide affordable cooking and lighting to households in India for the last 60 years. However, the kerosene subsidy in its current form is highly inefficient. There is a need to shift to efficient alternatives as high levels of leakage in the distribution of subsidised kerosene mar the subsidy program in its current form.

The analysis, the second of a two-part series conducted with the International Institute for Sustainable Development (IISD), found that only 49 per cent of the kerosene under the public distribution system (PDS) actually reaches households at a subsidised price. About 34 per cent of the allocated kerosene never reaches the intended households. According to the Economic Survey of India 2014-15, leakage in kerosene subsidies costs the exchequer USD 1.5 billion.

Petroleum products subsidies in India (including under-recoveries by Oil Marketing Companies)

Source: CEEW analysis, 2016

Key Findings

  • Only 49 per cent of the PDS kerosene actually reaches the households at a subsidised price. About 34 per cent of the allocated subsidised kerosene never reaches intended households.
  • There are many bureaucratic hurdles to getting a legal connection, especially in unauthorised slum areas.
  • Rural households spend INR 50–120 per month to meet their lighting needs from kerosene, with a median expenditure of INR 80.
  • Urban households spend between INR 400–800 per month, with expenditure crossing INR 1,500 per month in some cases.
  • The high upfront cost of an LPG connection limits many households’ ability to get one.
  • It also poses a significant public health burden on the overall economy, as using kerosene for cooking and lighting is hazardous to human health.
  • A transition from subsidised kerosene to alternatives could accrue net savings worth INR 8,000– 12,000 crore per annum for the lifetime of the alternative.

Monthly kerosene expenditure of rural households across states

Source: CEEW analysis, 2016

Key Recommendations

  • Make special provisions to release LPG connections in urban-slums through dedicated LPG distributors for such areas with 2–5 kg cylinder connections only.
  • Subsidise of the cost of connection, or reduce the size of cylinders. To 2-5 kgs.
  • Improve composite material of cylinders.
  • Focus on awareness programmes.
  • Work on challenges related to financing, service reliability, universal coverage, access, safety and cash flow to effectively enable a transition from kerosene to alternative sources.
A transition to alternatives such as grid electricity, solar lanterns, solar home systems, micro grids, and LPG could accrue annual net savings worth INR 8000-12000 crore over the lifetime of the alternative.

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Two years, four (achievable) goals

Towards a kerosene-free India

Wanted! Clean energy investors

Government has to be efficient about its resources

Widening the net beyond the income norm

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