Download Climate Change and Energy Access

Climate Change Mitigation as a stimulus
for Universal Rural Energy Access in India
Dr. P. BALACHANDRA
Department of Management Studies &
Centre for Sustainable Technologies
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 India’s
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?
Why rural energy access is a critical issue in
India?

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.
The issue is even more critical
Source: Estimated based on NSSO (2007); UNPD (2008)
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 1728% 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
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
Cooking energy access programmes - Outcomes

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.

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.
Electricity Access Programmes - Outcomes







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 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
1.
Need for climate change mitigation and
associated opportunities
2.
Large potential for renewable energy
resources
3.
Access to near-commercial renewable energy
(low carbon) technologies
4.
Pioneer in small and micro enterprises
5.
Targeting the current government incentives
Need for climate change mitigation
The
global climate change regime requires India’s
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 IEA’s reference energy scenario, India’s
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 not 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
 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


Woody biomass being used for cooking/heating is 200 MT
Energy forestry in wasteland (40 million hectares) is estimated
to contribute 255 MT (million tonne)
 Soft


biomass for biogas production for cooking
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
potential is more than 100 billion m3/year
(adequate for 275 million households).
 Biogas
(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 country’s 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
 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 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
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 assumed that a contribution of 50-70% would be from
distributed and small–scale 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
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

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
Implementation Framework
 Multi-stakeholder
and multi-level implementation
programme
 Enacting an exclusive integrated rural energy policy
 Creation of exclusive rural energy access authorities
within the government system as leadership institutions
 Establishment of energy access funds to enable
transitions from the regime of investment/fuel subsidies
to incentive-linked delivery of energy services
 Integration of business principles to facilitate
affordable and equitable energy sales to households and
carbon trade
 Treatment of entrepreneurs as implementation targets
and not millions of rural households
National & State
Governments
Create
Regulatory
policies
Stakeholders
 Financial institutions
 Energy Organizations
 Technical organizations
 Donor agencies
 Industries
 NGOs
 Government ministries
National Rural Energy
Access Authority
Energy access fund
 Energy subsidies
 Budgetary support
 Donor funds
Regional energy
access authorities
Implementation
framework
Entrepreneurship
development
programs
• Similar to RGGVY with
expanded scope
Regional energy
access funds
Capacity building
programs
Carbon
markets
Entrepreneurs
ESCO/
Intermediary
Micro-enterprises
Rural
households
Energy services
•
•
•
•
•
More stakeholders
Energy access authorities
Energy access funds
Business principles
Entrepreneurs instead of
franchisees
• Carbon markets
Micro-enterprise for energy services
Government
Energy Facility
Loan/incentive
Biogas
plant
Biogas
distribution
system
By-products
Cost/income
Biogas
Micro-enterprise
Electricity
Payment
sCost
GHG
mitigation
Cost
Villages/
Households
Generator
Biomass
gasifier plant
Financial
institution
Biomass
source
EMI
EMI
Livelihood
Enterprises
Revenue share
Loan
ESCO
CERs
Carbon
market
Sales revenue
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
service company) for accessing carbon
market
Bio-methanation enterprise

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

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
BiogasBiomass
Biomass
Gasifier
39%
14%
25%
1,730,000
315,000
3,300,000
69%
47%
86%
NPV (Rs.)
12,260,000
14,700,000
9,300,000
Enterprises
125
225
75
IRR
Entrepreneurs
NPV (Rs.)
IRR
ESCO
(Intermediary)
RHEES Project

Rural Hybrid Energy Enterprise Systems (RHEES)
– Proof of concept – Energy enterprises with profit + equity
– Biomass methanation & Gasification based systems in selected villages
– Integrate by-product based enterprises to enhance affordability levels of the
rural poor
– By-products – surplus energy, fertilizer, fiber, mushrooms, pest repellant,
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
Policies and Institutional mechanisms are already available
600,000 micro-enterprises; 2 million employment and 4,500
ESCOs, and by-product based enterprises, employment, livelihood
and business
THANKS