Expanding Access to Modern Energy in Rural India Dr. P.

BALACHANDRA
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Department of Management Studies Indian Institute of Science Bangalore 560 012

Motivation is to explore whether climate change imperatives be transformed as opportunities for expanding rural energy access in the India
Climate change mitigation is a necessity and Indias

participation is inevitable; Is expanding rural energy access a low hanging fruit? The market mechanisms created by international protocols have provided revenue opportunities for mitigation efforts; Whether these can reduce the cost of expanding rural energy access?
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Why rural energy access is a critical issue in India?

Energy access is a term mostly used in the context of describing the energy use pattern of poor people in the world. l It means a reliable and affordable access to modern energy carriers to perform basic end-use services like household cooking and lighting. These two are used as indicators of energy access levels. l What is the crisis?
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Only 55% of the rural population had access to electricity in 2005 and the remaining 45% relied on kerosene for their lighting needs. For cooking, only 8.6% of the rural population had access to LPG (cooking gas), 1.3% to kerosene and large share of 84% to biomass (firewood, agrowaste and cattle dung) in 2005. 726 million relying on biomass for cooking and 364 million on kerosene for lighting out of a total rural population of 808 million in 2005.

Source: Estimated based on NSSO (2007); UNPD (2008)

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0.73 billion are in India out of a total 2.15 billion world rural population without access to modern cooking fuels in 2005 (33.8% share). 0.36 billion in India out of a total 1.3 billion world rural population without access to electricity for lighting in 2005 (28.4% share). India accounted for 24.1% of rural world population. Lack of rural access to cooking in India is 90% compared to 64% in the world. Lack of rural access to electricity in India is 45% compared to 38% in the world. The issue is even more critical

Source: Estimated based on NSSO (2007); UNPD (2008); IEA (2006)

Energy poor are also income poor. Rural poverty line in India is Rs. 447 MPCE (Planning Commission, 2009)

The trends are disheartening, especially with cooking energy access (based on National sample survey organization (NSSO) and Census reports)

The regional disparities in cooking access levels are vast Top 5 states have access levels in the range of 17-28% and the worst 5 in the range of 2-5%.

The progress during last 11 years is discouraging for failure states. This is true even for successful states

Rural electricity access situation is far better compared to cooking access Electricity access levels were in the range of 10-34% in failure states and in the successful states the range was 80-96%.

Except for Uttar Pradesh other states are progressing well Even many focused programmes have failed to achieve desired results in failures states

First number within the brackets is the share of households using a particular fuel for cooking and the second number is that share of that fuel in total energy consumption.

Distribution of monthly average rural household electricity consumption in India (2005)

Average household electricity consumption per month in 2005 for electrified households

World 213 kWh USA 956 kWh China 56 kWh India 56 kWh India rural 39 kWh India urban 78 kWh

Estimated based on NSSO, 2007; MOSPI, 2007; MOSPI, 2006; EIA, 2008 and UNESCAP, 2009

Implications of lack of energy access

The outcomes are income poverty, primitive lifestyles, loss
of dignity, physical hardship, health hazards, lack of employment and polluted environment. Household energy access for cooking, lighting and other critical end-uses forms an important linkage in achieving the Millennium Development Goals (MDGs) and thereby sustainable development Click to edit Master subtitle style It is an aspiration as well as social necessity. India cannot be energy secure if her people remain without access to modern energy for lifeline needs.

Health impacts of lack of energy access

Globally two million deaths occur annually from pneumonia,
chronic lung disease, and lung cancer, which are associated with exposure to indoor air pollution and 99% of them occur in developing countries (UNDP-WHO, 2009) Women and children, especially the girl children, suffer most from indoor air pollution Click to edit Master subtitle style Respirable particles are strongly associated with acute respiratory infections among children accounting for largest number of child deaths in India (World Bank, 2004). Indoor air pollution is causing more than 400,000 deaths every year in India (World Bank, 2004)

Climate change and energy access

GHG emissions from rural energy is typically ignored considering that it is mostly from renewable biomass. However, this is not true at least in the Indian context. The total GHG emissions from rural household energy use in 2005 was 191 million tonne (including 141 million tonne from biomass combustion) compared to total energy related GHG emissions of 1,252 million tonne (WRI, 2010) in India. Rural household emissions are estimated to reach 330 million tonne in Click to edit Master subtitle style 2031-32. Black Carbon is estimated to contribute 10-20% of global warming compared to 40% by CO2 and residential sector contributes18-25% of the black carbon (Baron et al, 2009, Smith, 2009). Rural households contribute 134,000 tonne of BC annually, which is about 20% of BC emissions in India.

Access to modern fuels for cooking - Programmes

Policy towards rural cooking energy was to encourage use of noncommercial energy and discourage shift to commercial fuels with better conversion technologies like biogas plants and improved cook-stoves (Planning Commission, 1979 and1981). Efforts are guided by subsidy driven programmes with a technology dissemination focus. l National Project on Biogas Development (NPBD) in 1981:
Cumulative number of biogas plants built from 1982 to 2009 is 4.17 million

(MNRE, 2010) against a potential of 12 to17 million. The estimates suggest that about 1.05 million households were using biogas as primary cooking fuel in 2005 and this is about 28.3% of the biogas plants Click to edit Master subtitle style disseminated.
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National Programme on Improved Chulhas (NPIC) or improved cookstoves in 1983:

As on 31 March 2003 over 35 million stoves had been built across the nation In 2002, MNRE deemed NPIC a failure and funding was stopped and the

responsibility of continued ICS dissemination was passed to the states. In December 2009, the Ministry of New and Renewable Energy (MNRE) re-launched a re-structured National Biomass Cookstove Initiative (NBCI)

Access to modern fuels for cooking - Programmes

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Subsidies on household fuels for expanding cooking energy access:

Both LPG and kerosene are subsidized heavily. They are not targeted at poor

and are universally applicable to all categories of consumers. Indian government contributed Rs. 26.7 billion (US$ 0.6 Billion) in 2008-09 towards subsidies. The total under-recovery due to the sale of these under-priced fuels is to the tune of Rs. 458 billion (US $10 billion) in 2008-09. Benefit of subsidized LPG is largely enjoyed by middle and higher income urban households and that of kerosene by urban poor. Kerosene is predominantly subtitle lighting by rural poor. Click to edit Masterused forstyle A study in 2005 revealed that nearly 39% of the Public distribution system (PDS) kerosene was being illegally diverted (NCAER, 2005).
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Deepam, a scheme for expanding LPG access to poor in the state of Andhra Pradesh Rajiv Gandhi Gramin LPG Vitrak (RGGLV) A scheme for expanding LPG access

Cooking energy access programmes - Outcomes

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MNRE programmes on biogas and improved cook stoves were technology centric approach aiming more on dissemination rather than expanding access. Success was measured in terms of numbers deployed rather than how many use. With cattle ownership and availability of adequate dung being the criteria for installation of biogas plants, the poor got excluded from the programme. Thus, government subsidy for installing biogas plants was targeted at rural high income families. Click to edit Master subtitle style LPG subsidy is directed at mostly middle class and rich. Kerosene subsidy is mostly for lighting and directed at urban poor for cooking. Nearly 40% of kerosene is diverted. Andhra Pradesh accounts for 33% of LPG using poor households in India (an outcome of Deepam scheme).

Only 10.7% of the biogas using rural households belonged to poor and this is 5.8% for LPG. In 2005, 45% of the rural households were poor (MPCE < Rs. 455)

Electricity Access - Policies

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Electricity Act 2003

Universal obligation on the part of government to endeavor

National Electricity Policy, 2005 and Rural Electrification Policy, 2006

Access to electricity for all households in next 5 years Minimum lifeline consumption of 1 kWh/household/day as a

electricity supply to all areas including villages and hamlets National policy for rural electrification Bulk purchase of power and management of rural distribution through local participation Stand-alone systems, removal license requirements from the state governments in notified rural areas
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merit good by 2012 Rural electricity infrastructure and implementation mechanisms

Electricity Access - Programmes

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Rural Electrification Corporation (1969): Financing rural electrification schemes and promoting electricity co-operatives. Kutir Jyoti Scheme (1988-89): Providing single point lighting connections to below poverty line (BPL) rural households. Accelerated Rural Electrification Programme (AREP): Interest subsidy of 4% on loans for rural electrification. Accelerated Electrification of one lakh villages and one crore households: 40% capital subsidy and remaining loan. Rajivto edit Master subtitle style Click Gandhi Grameen Vidyutikaran Yojana (RGGVY) in 2005

Establish village electrification infrastructure within next five years Free electricity connection to all rural households below poverty line All relevant stakeholders are included Government provides 90% of the capital cost as grant Projects are managed by franchisees (NGOs or entrepreneurs) The awarded cost till now is Rs. 287 billion (US$ 6.4 billion)

Electricity Access Programmes - Outcomes

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All programmes prior to RGGVY have failed to achieve the objective of universal access to electricity. Through RGGVY India could electrify only 23% of the targeted rural households during last four-years. As on 1st January 2010, a total of about 9.4 million households are electrified. Though initial goal was to provide electricity access to all households and free connections to 23.4 million BPL households by Click to edit Master subtitle style 2009, the targets have been revised to free connections to 17.5 million BPL households by March 2012. The estimates suggest that rural household electrification level is likely to be about 64% by 2009 compared to 43.5% in 2001. Focus was mostly on connectivity. Energy problems are yet to be resolved. Unreliable and low quality supply

Expanding rural energy access: Opportunities

Lack of energy access had serious negative implications for economic, social, & environmental wellbeing of human kind Large number of programmes has been initiated by the government and they have failed to achieve the desired goals of universal access These lessons suggest that India needs a radically different approach to bridge the rural energy access gap. Click to edit Master subtitle use The proposal is to style opportunities provided by climate change mitigation imperative and other inherent capabilities possessed by India to stimulate expansion of access to modern energy carriers for rural households.

Expanding rural energy access: Opportunities

1. 2. 3. 4. 5.

Need for climate change mitigation and associated opportunities Large potential for renewable energy resources Access to near-commercial renewable energy (low carbon) technologies Pioneer in small and micro enterprises Targeting the current government incentives Click to edit Master subtitle style

Need for climate change mitigation

The global climate change regime requires Indias contributions in mitigating GHGs India cannot avoid participation citing the need for development. Non-participation might result in economic consequences. Expanding rural energy access is a low hanging fruit According to IEAs reference energy scenario, Indias Click to edit Master subtitle style energy related CO2 emissions are expected to increase from 1.3 Gt in 2007 to nearly 3.4 Gt by 2030 (IEA, 2009). The climate stabilization 450 ppm scenario requires India to reduce CO2 emissions to 2.2 Gt by 2030 from 3.4 Gt. Rural energy access has a potential of up to 0.2 Gt.

Climate Change: Opportunities

Market mechanisms like Clean Development Mechanism (CDM) created by international protocols allow mitigated GHG emissions to be traded in carbon market. CDM in its present form is not exactly suitable for rural energy access programme. It is too restrictive and preference is always for large scale and easy to implement GHG mitigation projects. Though sustainable development and conforming to national priorities are listed as critical factors for approval of a CDM project, these are notClick to edit Master subtitle style strictly adhered to in practice. Projects catering to the needs of poor and maximizing social wellbeing hardly attract attention of CDM market. Reforms in CDM are being proposed (IEA, 2009)

Sectoral crediting mechanisms - emission reductions at the sector level, relative to a pre-defined sector baseline. Policy CDM - Government policies generating CERs related to renewable energy, efficiency standards, energy subsidy, etc.

Renewable energy resources

The past experiences suggest that centralized energy supply alone cannot achieve universal access. Distributed energy systems relying on renewable energy sources will have to play significant roles. Among renewable energy sources, biomass appears to be most promising for India Hard or woody biomass for electricity generation Soft biomass for biogas production for cooking

WoodyMaster subtitle style used for cooking/heating is 200 MT Click to edit biomass being Energy forestry in wasteland (40 million hectares) is estimated

to contribute 255 MT (million tonne) Soft biomass of 300 600 MT Cattle dung of 450 MT

Renewable energy technologies

Biomass combustion/gasification technology Bio-methanation or biogas technology Both are commercial and India has experience in largescale dissemination of these technologies. Power generation potential is 60,000 MW Biogas potential is more than 100 billion m3/year Click to edit Master subtitle style (adequate for 275 million households).
(Based on Planning Commission, 2005, MNRE, 2010, Ravindranath, et al, 2005, Vijay, 2006)

India; a pioneer in MSME sector

Medium, small & micro enterprise (MSME) sector contributes to 8% of countrys GDP, 45% of manufactured output and 40% of its exports (MSME, 2010) As per fourth census of MSMEs; in 2006-07
26 million medium, small and micro industries 29% engaged in manufacturing and the remaining 71% in services 52% of the MSMEs are rural based MSMEs have provided employment to 60 million people Click to edit Master subtitle style This is second only to agriculture Women employees account for 17% of the total employment About 91% of enterprises are of proprietary type indicating the entrepreneurial qualities of the individuals

Targeting Subsidies
Kerosene subsidy of Rs. 10 billion and LPG subsidy of Rs. 17 billion in 2009, total of Rs. 27 billion (US$ 0.6 billion) Kerosene and LPG under-recovery of Rs. 458 billion (under pricing) in 2009 (US$ 10.2 billion) Electricity subsidies are provided by the state governments and they were approximately Rs. 415 billion (US$ 9 Click to edit Master subtitle style billion) in 2006 (IEA, 2007) Nearly US$ 20 billion per year is available. Major portion of it can be made available as incentives for expanding energy access.

A proposal for achieving universal rural energy access

Process of providing access to modern energy for all rural households Energy access scenario Implications of the above on energy resources, investments, cost and benefits, and environment Policy and institutional framework required for enabling such a transition Implementation mechanism and financial feasibilities Click to edit Master subtitle style

Scenario of universal rural energy access

Proposal targets 100% access to modern energy carriers for cooking and lighting by 2030, in 20 years starting from 2010. The energy needs are to be met with a judicious mix of supply from centralized (electricity grid and LPG) as well as decentralized renewable energy-based systems (electricity and biogas) It is Click to edit Master subtitle style assumed that a contribution of 50-70% would be from distributed and smallscale renewable energy technologies The rate of transition towards universal energy access is expected to be slow at the beginning and to pickup towards the end. Expanding rural energy access through decentralized energy systems would be based on market principles by adopting a public-private partnership driven business model approach

Scenario of universal rural energy access

2010 base year status is established by projecting the 2005 data using past growth rates in access levels. As in 2010, the total rural households are 165 million (based on UNPD, 2008, Census, 2001). Out of these, 25 million have access to modern cooking fuels and 106 million to electricity. By 2030, the total rural households predicted to grow to 188 million. Click to edit Master subtitle style The scenarios track providing access to 163 million households for cooking and 82 million for lighting. Data from various secondary sources as well as few relevant assumptions were used to estimate the implications of providing universal rural household energy access

Cooking energy access: Implications by 2030

Total annual energy requirement of 10 million tonne of LPG and 34 billion m3 of biogas Soft biomass (dry) requirement of 67 million tonne (potential 300-600) and cattle dung (wet) requirement of 355 million tonne (potential 450). Total investment over a period of 20 years is Rs. 870 billion Click to 19 billion) and (US$ edit Master subtitle styleannual recurring cost is Rs. 230 billion (US$ 5 billion). Annual GHG mitigation potential of 190 million tonne (including 37 million tonne of avoided emission of CH4 from cattle dung)

Rural electricity access: Implications by 2030

Total annual energy requirement of 23,000 GWh
Incremental requirement is about 5,500 GWh (3,300 GWh from grid and 2,200 GWh from distributed systems) Additional installed capacity of 7,000 MW (4000 MW grid and 3000 MW distributed). Incremental lifeline energy requirement of 25,000 GWh is possible with this capacity.

Woody biomass requirement of 12 million tonne (potential > 400). Total investment over a period of 20 years is Rs. 760 billion Click to edit Master subtitle style (US$ 17 billion) and annual recurring cost is Rs. 55 billion (US$ 1.2 billion). Annual GHG mitigation potential of 21 million tonne (with lifeline consumption)

Universal Rural Energy Access

For cooking and lighting

Total annual energy requirement of 1,300 PJ Total investment over a period of 20 years is Rs. 1,650 billion (US$ 37 billion) Total annual recurring cost is Rs. 236 billion (US$ 5.2 billion). Annual GHG mitigation potential of 213 million tonne Click to edit Master subtitle style Average GHG abatement cost of Rs. 1,830/tCO2e (US$ 41/tCO2e) Lighting access is about US$ 205 per household Cooking access is about US$ 120 per household

Inputs for Policy/Institutional framework

Policies are in place to enable such a transition, however they are fragmented. The need is to integrate these and create a national rural energy access policy focusing on household electricity and cooking energy. Ensuring compatibility of CDM projects to national development priorities. Click to edit Master subtitle style Establishment of energy access authorities, both at the national and state levels. Creation of energy access funds with plan grants as well as budgetary support. Transferring energy subsidy amounts to this is crucial. Transforming RGGVY franchisees in to rural energy enterprises.

N t l &St te aiona a Gov rn e ts e mn Create St k h e a e old rs

Re u t g laory p olicie s

N t a R ra En rg aion l u l e y A ccess A th y u orit

Fin cial institutio an ns EnergyOrganizations Te nical or izations ch gan Donor a cies gen Industries NGOs Gov m m ern ent inistries

En rg a e y ccess fu d n Energy su bsidies Budget support ary D onor funds

Rg aee y e ion l n rg a ccess a t orit u h ies

En re re e rsh t p n u ip d ve m n e lop e t p rogra s m

Implementation framework

Similar to RGGVY with expanded scope

Rg aee y e ion l n rg a ccess fu d ns Ca on rb m rk t a es

Ca a b ild g p city u in p ra s rog m

En re re e rs t p nu ESCO / In e e ia t rm d ry

M icro-e t rprise ne s Ru l ra h ouse old h s En rg se ices e y rv

More stakeholders Energy access authorities Energy access funds Business principles Entrepreneurs instead of franchisees Carbon markets

Micro-enterprise for energy services

Financial feasibility of Enterprises Bio-methanation for cooking energy access Biomass Gasifier and CFLs for lighting and lifeline energy access A bundling intermediary (ESCO; Energy serviceMaster subtitle style for accessing carbon Click to edit company) market

Bio-methanation enterprise
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Village with 200 households requiring 200m3 capacity biogas plant/s. Total new investment (biogas plants, distribution system & stoves) is Rs. 1.6 million annual O&M cost of Rs. 0.21 million CO2e mitigation per year ranging from 214 415 tonne A micro-enterprise model with equity contribution of 20% and a soft-loan at 6% interest rate and a repayment period of 5 years. A profit (from carbon trade) sharing arrangement with ESCO with 98% for enterprise and 2% for ESCO. Household repayment of Rs. 20,000 (@ Rs. 100/HH/Month). At present CER rates of US$ 20/tCO2, the enterprises will be able to make only marginal profits during the repayment period and this is expected to improve substantially after 5 years. Government to provide incentives to increase profitability of the enterprises from energy access fund.

Biomass-gasification enterprise
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Five villages with 1000 households requiring 65,000 kWh/year for basic lighting with efficient technologies. For economies of scale, a 100 kW biomass-gasifier is proposed with a generation potential of 530,000 kWh per year. Remaining 465,000 kWh will be used for other end-uses and productive livelihoods at higher tariff. Total new investment is Rs. 5.0 million and annual O&M cost of Rs. 0.35 million and input fuel cost of Rs. 1.6 million and same financial arrangements as that bio-methanation enterprise. CO2 mitigation potential per year is 581 tonne assuming grid as the competing option Differential tariffs for various end-uses At present CER rates, the enterprise would be under loss during the first 5 years and making significant profits afterwards.

Profitability measures
Enterprises Biogas-Dung Biogas-Biomass Biomass Gasifier 25% 3,300,000 86% 9,300,000 75

IRR Entrepreneurs NPV (Rs.) IRR ESCO (Intermediary) NPV (Rs.) Enterprises

39% 1,730,000 69% 12,260,000 125

14% 315,000 47% 14,700,000 225

Conclusion
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Climate change mitigation linked energy access expansion programme has multiple benefits; monetary, social/ethical, compliance, etc. Resources are more than adequate

US$ 24 billion/year versus an investment of US$ 37 billion and expenditure of US$ 5.2 billion/year Energy resources Requirement is less than the prevailing biomass consumption

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Policies and Institutional mechanisms are already available Only suggestion is that the energy governance should include the demand-side dimension Mitigation of black carbon emission is a major plus 600,000 micro-enterprises; 2 million employment and 4,500 ESCOs

THANKS

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