Dialogue January-March, 2013, Volume 14 No. 3

Energy Security: Sustainable Energy Solutions for the Poor

Sarah Alexander

Securing a country’s energy supply, especially for developing countries, is vital and in the current atmosphere of questions over sustainability of ongoing practices there is a need to consider solutions that are affordable and have minimal impact on the environment. India’s rising fuel import deficit which includes a steady increase in imports of coal and crude oil exposes the nation to price volatilities and in turn restricting access due to the expensive nature of imported fuels1. In addition, global debates on climate change have nudged India to announce reductions in its carbon intensity by 20-25% by 20202. Within these contexts, steps are already being taken by domestic governments including India to diversify supply, increase domestic capacity, tap into local energy sources and reduce demand in an effort to manage an impending energy crisis.

What seemed like a much needed wake up call were the recent blackouts3 crippling over 600 million residents in North India which revealed the immense pressure placed on conventional power infrastructure compounded by politics and mismanagement. The blackout also revealed the impact of not having electricity on the economy; public transport came to a halt, daily business transactions slowed down, productivity was sporadic, businesses even with back-up generators had to shut down after a while due to lack of fuel, pumps were not working so there was no water and so on. This underscores the important correlation between economic growth and availability of  reliable power. This trend is validated even in India’s growth story of 77 percent which also coincided with a 60 percent increase in electricity consumption4 implying positive impact over economic development. Pressing economic, environmental and energy security concerns have been driving up rapid growth in investments in Renewable Energy sector globally over the last decade. India, despite a being a late entrant into the field, has made rapid strides in this sector with an annual growth rate of 33% in 2010 against the global growth rate of 26% during the same period5.

 While these high level efforts are appreciated, much of the debate has been focused on centralized solutions, grid interactive technology, large power plants that would supplement ongoing grid extension programs or erratic power supplies in urban areas. The poor are often overlooked as low income markets who are not financially viable (or with attractive returns) to warrant significant investments in infrastructure and as a result suffer either a complete absence or erratic energy supply. India’s energy future will need to be driven, not just by large-scale generating facilities to power aspirational economic growth but also by providing access to over 400 million who currently have no access to basic energy requirements. What about those micro-economies?

Recent estimates6 by the Government of India reveal that fuel and light expenditures for the urban and rural poor is the third highest expenditure after food and health. Despite these revelations, many of us still find it difficult to imagine that lack of energy perpetuates the cycle of poverty. The common notion is that renewable energy is expensive and thus to provide the poor with immediate access to energy, nuclear and coal are the only options. This, is an extremely naive thought process and these solutions, financially and socially unsustainable. This article highlights the importance of thinking in terms of sustainable energy solutions that link energy security–reliable energy supply– and poor sections of India and steps that can be taken to speed up the process of implementing these pro-poor solutions.

India is, a country of paradoxes, with a mixture of a highly developed world (second fastest growing economy in the world) and very underdeveloped world (more than 500 million people living below the poverty line). The poor are not a homogeneous segment and thus many of the standardized methods of providing them with energy services will not be sustainable in the long run. Energy is a critical prerequisite to development but it does not imply that development will follow. For economic benefits to flow, reliable energy solutions need to be integrated into a broader development plan that gives importance to areas such as water, health, education, livelihoods and so on. The sources of energy used and the manner in which energy services are produced and consumed are of crucial importance to sustainable development and, in particular, to the poor. Studies7 8 have validated the high cost of energy to the poor with poor households spending a higher percentage of their incomes on energy than wealthier ones. Estimates range from about 5 percent up to 20 percent of cash income or expenditure. By being forced to spend a significant portion of their incomes on energy, that too, inadequate rustic forms of energy, households are being deprived of other basic goods and services needed to sustain a decent quality of life. These studies indicate that in the absence of reliable energy supply, people spiral deeper into poverty and in turn desperate living conditions. For instance, lack of lighting stymies education — the ability of children to study at home, livelihoods — stifles productivity if engaged in household businesses and health-polluting effects of open fires for cooking leads to impaired health due to respiratory congestions as a result of chronic exposure to these fumes, water-inability to pump clean water, ICT-archaic communication technologies. Skilled seamstresses cannot upgrade their manual sewing machines to electric machines with higher efficiencies, silk weavers use machines with interrupted power supply leading to lower productivity, consequently higher electricity bills (because of inefficient motors) eat into incomes, the list goes on. The result is very evident –large numbers have remained poor with no avenues to increase their income and quality of life due to the lack of access to reliable energy and the cost of delaying the solutions of reliable energy to poverty alleviation although enormous, is often neglected.

Any plan which continues to perpetuate the centralized model of power distribution will surely run into the same challenges pervading the conventional grid systems. Renewable energy technologies are well-suited to meet India’s need for power in remote areas that lack grid and road infrastructure due to the distributed nature of resources and the scalability of system design. Decentralised energy systems close to the point of final use which reduce grid loads and energy losses in distribution should be encouraged to develop. Building up clusters of renewable micro grids, especially for people living in remote areas, will be a central tool in assuring sustainable energy. However, what is most often heard are statements like: “Solar energy is expensive” –and the same are other renewable energy sources. What is often forgotten is that this statement is only valid in comparison to the grid, which is itself heavily subsidized. The statement ceases to apply when we widen the segment to include households that are still unconnected to the grid. Kerosene fuel for lighting is a reality in most un-electrified households. And this fuel is by no means economical for the poor. For instance, each household in the state of Karnataka, India, uses approximately 5-7 liters of kerosene per month on lighting alone. While the first 2 liters are available at a subsidized price (when purchased through the Public Distribution System), the remaining quantity is bought in the market at nearly $1 per liter (approx Rs.54.00). Today, nearly all households in rural India own a mobile phone. The lack of electricity connection forces them to charge their mobile phones at 10 cents (approx Rs. 5.00) per charge at the nearest electrified town. Not considering the cost of travelling to and fro, charging mobile phones costs the household a little more than $1 per month. Consequently, they are forced to spend between $3 and $4 a month — a significant part of their monthly income — on the most basic energy requirements of lighting and mobile phone charging.

It is worth comparing this to the cost of availing a solar energy system (with a mobile phone charging unit as an add-on) through a bank loan. A basic single-light solar home lighting system costs approximately $160 (approx Rs. 8800.00). This taken as a bank loan at market rate of interest (12%) over a 5 year period works out to $3.5 per month. An installment based payment is in line with the cash flows of the rural household and overcome the burden of putting down a large one-time payment.

Contrary to what is commonly believed, the problem is not with the availability of technology. Rather, the difficulty lies in providing energy access through practical, feasible and affordable mechanisms, which are often the missing gaps in technology dissemination and utilization. A number of solutions and models of business, for the problems mentioned above, already exist in some of the more advanced developing countries like India. They need to be scaled up and replicated. A recent report9 in India by Greenpeace showcases the diversity of renewable energy solution tailored to fit the local needs and conditions. The solutions range from waste products like rice husk, grid interactive photovoltaic technology, standalone solar systems, pico hydro plants in remote locations in order to satisfy a variety of daily energy needs such as cooking, lighting, livelihoods and all this within a diversity of contexts that vary by geography, governance and economic models.

The lessons from the report underline a fact that the poor are not a monolithic structure. Many of the successful models cannot be replicated in total. But most processes of these successful models can be replicated with certain variations depending on the culture, financial behavior etc. Before we jump into replication of processes or models, the eco-systems need to be in place that promotes an integrated energy approach and development angle for the poor. Following are some pathways to consider when developing such an approach:

· Financial Inclusion : This is a two-fold process involving consumer financing that enhances affordability and purchasing power in line with cash flows and also building capacities within local financial institutions to develop energy portfolios that encourage the dissemination of these solutions. The latter can be through capacity building initiatives, RBI norms such as priority sector lending, easier transaction processes for small quantum loans etc.

· Developing locally available energy sources : Rather than promote one type of technology irrespective of its viability, efforts need to be made to develop locally available energy sources and in turn the infrastructure needed to make it viable.

· Cross sectoral collaboration : Integrate sustainable energy into various pro-poor development programs in order to provide holistic solutions like powering up digital education tools, equipment for hospitals, safe and clean drinking water and so on.

· Consultative Policy Process : Improving renewable energy access for rural and underserved communities is an arduous task requiring supportive Government policies. Unfortunately, a number of policies in this sector in India have failed to appreciate ground-level realities and practitioner perspectives. As a result, they have not benefitted the end users and have instead become barriers in the way of enterprises providing energy solutions. Proactive efforts are required to engage various stakeholders to adequately address shortfalls in policy and provide corrective policy measures early on especially in a nascent renewable energy field.

· Human Resources : The need for skilled human resources in the sector is large and has not been fully addressed. In general, attention needs to be paid in developing human resources at all organisational levels of renewable energy enterprises – operations, sales and marketing, finance, servicing and community involvement. Renewable energy deployment programmes should capitalize on the existing Industrial Training Institutes (ITIs) in the country to increase the capacity of local people to handle technologies on the ground. The emphasis on long-term functioning and sustainability of energy access should take due note of the appropriate manpower requirements at the local level.

· Promotion of models that tap into decentralized services : At present there are very few incentives encouraging locally brewed models that are attempting to develop market driven forces to address social barriers.

This is by no means a complete list but it does highlight the non-technical aspects that need to be taken into consideration when applying energy (renewable or otherwise) solutions for the poor. Other factors such as politics, urban area favoritism, cultural and demographics are inhibitors in energy development that widen the gap between “haves” and “have-nots”.

Worldwide the current reliance on grid extension or large-scale centralized solutions will leave more than one billion people living without access to modern energy services by 2030 according to the International Energy Agency (IEA). The IEA has found that half of all energy services will have to be provided by off-grid clean energy investments in order to deliver universal energy access by 203010. This does not mean that in one sweep renewable energy will solve the energy crisis, rather we have to be mindful that an organic transition needs to take place which takes an integrated approach with a mix of grid extension, grid interactive and off-grid systems to meet the energy requirements of the poor keeping in mind existing practices and contexts.

At the end of the day, providing power to the people is not about technology, finance or markets, or even energy. It is about enabling marginalized groups of people to gain access to what most of us see as our rightful entitlement –to make choices that enable us to improve our lives, and the lives of our families. Until this becomes the true core upon which we build all programs and policies, providing energy solutions-renewable or not will remain a formidable challenge, relegated to constant dialogue and nothing much else.

Footnotes

         1  http://blogs.wsj.com/indiarealtime/2011/03/09/indias-widening-energy-deficit/

       2  Ministry of Environment and Forests; available online at http://moef.nic.in/downloads/public-information/UNFCCC%  
           20Submission_press_note.pdf

       3  http://www.nytimes.com/2012/08/02/world/asia/power-restored-after-india-blackout.html?pagewanted=all&_r=0

       4  Energy Poverty in Rural and Urban India. Are the Energy Poor also Income Poor? Khandher et al. 2010. Policy Research Working Paper.

       5  REN21, Global Status Report, 2011.

       6  Level and Pattern of consumption expenditure, 2009-10, NSSO 66th  round

       7  Productive Uses of Energy for Rural Development. Energy and Environment Review. Coauthor with Anil Caabral and Sachin Agarwal. 2005.

       8  The Next 4 Billion: Market Size and Business Strategy at the Base of the Pyramid. Hammond et al. 2007

       9  Taking Charge. Case studies of decentralized renewable energy projects in India. Greenpeace, 2010.

         10   World Energy Outlook. IEA 2010