Bangkok | Mar-17 | TERI: Issues and Opportunities for Rural Energy Access in Asia

Creating Innovative Solutions for a Sustainable Future

Issues and opportunities for rural energy access for development of South Asia

Debajit Palit, Associate Director, TERI

[email protected]


People Lacking Access to Energy

Urban/Rural

Electrification rate (%)

Number of people

lacking

access to electricity

Number of people relying on

traditional use of biomass

for cooking

Africa 71 / 28 634 793

Sub-Saharan Africa 63 / 19 632 792

Developing Asia 96 / 79 512 1875

China 100 0 453

India 96/ 74 244 819

Bangladesh 84 / 51 60 142

Nepal 97 / 72 7 23

Pakistan 90 / 61 51 105

Latin America 98 / 85 22 65

Developing Countries 92/ 67 1185 2742

World 95/ 71 1186 2742

Source: World Energy Outlook, 2016


Electricity Access - Recent advances

Access situation improving over the years

Annual growth in access to electricity during 2010-2012

o has reached 0.6 %,

o approaching target growth rate of 0.7 % for universal access by 2030

o and much higher than growth of 0.2 % registered over 2000–2010

Global progress majorly driven by advances in India & South Asia

o 155 million people in India gained electricity access during 2009–14

o 35 million people in Bangladesh gained access during 2009 - 14

Achieving the goal of electricity access for all by 2030 will depend critically on the top 20 access-deficit countries

o 3 countries are in South Asia – Bangladesh, India & Pakistan

Source: Global Tracking Framework, 2015


Challenges remain!

Sub-Saharan Africa and South Asia have the most population w/o modern fuels access

Large inequities in energy access - urban/rural; sub-national; Men/Women

Ensuring cooking energy access is more challenging

o Fuel stacking & transition from biomass to modern fuels

Pico solar – not recognised by most governments as means for electricity access (till 2010 BGD figure were exclusive of SHS)

Many micro-grids are underperforming or prematurely failing

Policy uncertainty – grid/off-grid distribution

Institutions – mostly small, resulting in high transaction cost


“Some” Key Challenges – Electricity Supply Side

Long break even for investors due to poor tariff structure (set mostly in line with current expense on fuels)

Sector not regulated leading to several problems – consumers paying much higher than fair price / supplier monopoly

Financing mini-grids - low cost, long tenure debt is critical

Supply-chain for hardware – Quality issues

Uncertainty - transition/grid integration planning by operators/investors

Inability to diversify the consumer base

Lack of demand aggregation at the sub-district level;

Lack of evidence on long term business viability–IRR profile


Considered as a fill gap / temporary arrangement by consumers leading to limited buy-in

Pricing vs. limited availability of power (duration/threshold consumption )

Market failure at the bottom of the pyramid (due to lack of demand and limited ability to pay)

Perceivably higher upfront investment by consumers vis-à-vis alternative fuels

Consumer retention in absence of a robust business model and perceived higher price than grid electricity

“Some” Key Challenges – Electricity Demand Side


Income (in)elastiticty

Influences Willingness to Pay for better and higher level of service

100

110

120

130

140

150

160

170

180

Kerosene Off grid Grid

Average WTP: INR/kWh As users move from basic lighting

to paying for additional services, the slope of WTP reduces as income poverty comes into play.

This income constraint reduces the elasticity of the user to pay more even for slightly better services (fan, TV. Etc.)


“Some” Key challenges – Cooking energy

Large population w/o clean cooking fuels access in SA region

Biomass continues to be the dominant fuels – Why?

Current improved biomass stoves do not always provide cleaner environment for cooking

Barriers to adoption of cleaner efficient biomass stoves

o Overemphasis on technology, under emphasis on the user-friendliness

o Lifestyle change may be required to use improved cookstoves

o Purchasing patterns (men tend to take decision, while women are users

While technologies exist for better options (LPG, Induction top), income (in)elasticity key to their adoption

o E.g. Hourly likely expenditure for LPG & Induction stoves is INR 5-7/hour vs. INR 2-3/hr in improved biomass stoves

o Supply chain of modern fuels is challenge in remote sites

o So, most rural households resort to “fuel staking”


Key challenges - Gender & Social Inclusion

Electricity policies rarely address gender issues explicitly

o Even when addressed, they do not appear to translate into practice in a systemic way

International initiatives & national policies for electrification often are gender-blind in terms of anticipated benefits,

o assumes benefits will trickle down & be of equal use to women & men; or they primarily focus on women’s domestic role

o do not explicitly acknowledge the differentiated needs of women, men, girls and boys for creating equal outcomes

o very few cases to observe where women have actively involved in decision-making processes, policy formulation or in electricity supply chain


Key challenges - Gender & Social Inclusion Much of this stems from lack of understanding & documented

evidence of the merit of including gender elements in energy policies or programmes

Recent growth in private sector off-grid sector appear to show some interesting anecdotal evidence towards gender inclusion & women’s empowerment, although varied in ‘pace’ and ‘depth’

o This may be due to the fact that these initiatives are usually designed through demand-driven “bottom-up” approaches

Wider legislations - land rights, inheritance rules etc. - affects women’s degree of empowerment through electrification

o Lack of pressure from grassroots level act as a barrier for realising gender goals


Challenge for Policy: how to link the two SDGs?

SDG 7: Ensure access to affordable, reliable, sustainable and modern energy for all

SDG 5: Achieve gender equality and empower all women & girls

Sustainable Energy for All & Global Tracking Framework (GTF):

Golden – but missed – opportunity to start collecting gender sensitive data?


Scarcity amongst plenty in India

Installed power capacity in India > 300 GW

o But PLF of thermal power plants ~ 60%, Max 158 GW Peak

o Electricity available at INR 3.0 (5 cents) at Power Exchanges

Still 50 million HH w/o electricity access

Brown outs and black outs continues

Losses are high, many discoms continue to bleed

o Though new UDAY appears to bring some hope

The key issues is: Inefficient Distribution Sector Management /Operational Inefficiency of DISCOMs


India - Where are the unconnected households?

Households in un-electrified remote villages

o Balance Un-electrified villages as on Feb 28, 2017 – 5169

Villages to be electrified through grid (DDUGJY) – 2328

Villages to be electrified through off-grid (DDG) – 2821

Households in unconnected hamlets of villages with grid

o No specific number available, crude estimate is 50,000 hamlets

o Opportunities for smart mini-grids for such locations

Un-electrified households in grid connected villages

o MoP is proposing EMI scheme to connect to APL households

o Opportunities for standalone DRE solutions/Sola Home Systems


Off-grid Market Opportunities in India

TCG Estimated the market size for

solar home systems to grow at 60% per year

to reach a market size of US$200-250 million by

2018.

Estimate that annual SHS sales would reach over 3 million units by 2018 resulting in a market worth

over US$215 million.

IFC Assumed that the

criteria for transfer of the cash subsidy

would be possession of a

Below the Poverty Line

(BPL) card, an estimated 50-55

million households

which currently enjoy the

kerosene subsidy, are likely to be excluded from

the scheme

cKinetics

USD 82 million would be

available for developing the rural DRE mini-grid sector in

India, of which USD 71 million is

grant/donor capital and only

USD 11 million is available from

non-grant sources.

WRI

Estimate off-grid energy access

market includes 114 million households who are at the base

of the pyramid (BOP) earning less

than $2/day. Specifically,

decentralized renewable energy enterprises (DRE) offer an annual

market opportunity of $2.04 billion while the solar

home lighting (SHS) market is estimated to be $27.4 million a

year.

IEA

The IEA estimate that the 400

million people without access to electricity in the country spend

over $60 billion annually on

energy (primarily inefficient and

antiquated sources such as

kerosene).


Major Commitments in India

GoI Mini-grid programme/RESP–10,000 minigrids/500 MW in 5 years

DFID - £0.5m Energy Access Policy Fund (EAPF) with MNRE

ADB - $30 million Clean Tech Fund for private sector DRE/mini-grids

Rockefeller Foundation - $75 million initiative to establish 1,000 mini power grids by the year 2018. First 100 mini grids reportedly set up

GIZ- supporting UPNEDA to promote 100 private sector mini-grids

IFC - Clean Technology Innovation Fund, a $60 million to invest in early stage, clean-tech companies;

TCG – Off-grid debt fund to finance projects

USAID/Santa Clara Barbara University- Providing technical assistance to raise and leverage $40 million for clean energy projects in India

Others – World Bank, Shakti Sustainable Foundation, etc.


Exposure to & satisfaction of grid vs. micro-grid


What models of Mini-grid may be viable?

Distributed Generation and Supply/Mini-grid set up in un-electrified habitations of grid connected villages; Grid arrives later o No interconnection – Distributed Generation and Supply ;

operates PDN in parallel to grid (G+D)

o Interconnection – Distributed Generation and Supply - operates PDN in parallel to grid and may export excess power, if available during off-peak hours to the grid (G+D)

o Interconnection – Distributed Generation and supply - no longer operates on grid extension; exports all power generated to grid at FIT (G only)

o Interconnection – Distribution Generation and Supply; continues to operate and imports power from the grid as demand increases or become franchisee of the utility (G+D)


What models of Mini-grid may be viable?

Grid connectivity exists in the village, Many un-electrified households or power availability is inadequate

o No interconnection – Distributed Generation and Supply; operation in parallel to the existing grid (G+D)

o Interconnection – Distributed Generation and Supply - operates PDN in parallel to grid and may export excess power, if available during off-peak hours to the grid (G+D)

o Interconnection – Distributed generation without supply; utilizes available renewable energy resources in the village, generates and exports all power to grid at FIT (G only)


What interventions will be required

Smart Policy and Regulatory

architecture

Smart Technology

Smart Finance and

Markets


The Challenging decision

What government policies could increase the support (such as availability of low cost/priority capital, regulatory certainty, etc. for private sector to improve access ?

What kind of returns & payback period the company should expect?

Smart/flexible subsidies

How viability can be enhanced

Anchor Loads, Niche Applications - pumps, Swarm electrification

Micro-grid vs. aggregated/interconnected micro-grids

through mission support (CSR, volunteering etc.)

What should be the role of different stakeholders- community, companies, donor agencies, government?

Building capacity - what and how long

Technical Assistance support


Thank You

[email protected]

Bangkok | Mar-17 | TERI: Issues and Opportunities for Rural Energy Access in Asia

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Transcript of Bangkok | Mar-17 | TERI: Issues and Opportunities for Rural Energy Access in Asia