Clean India: Building a renewable energy ecosystem

25-Feb-2016 #Company News Source: India Inc

SELCO Foundation’s Vivek Shastry delves into the importance of creating an ecosystem that is geared towards Decentralised Renewable Energy (DRE) solutions for India’s massive energy challenge. 

Globally, under-served families spend over $36 billion to light their homes with kerosene, leading to over 1.5 million deaths annually, in addition to the documented polluting effects.

Clean-IndiaOver the past decade, India has halved the proportion of rural households using kerosene for lighting. Over a fourth of the rural population is yet to make the switch. Further, a recent assessment of energy access in six central and northeastern states revealed that over 50 per cent of the households in “electrified” villages were deemed to have severe deficiencies in the quality, reliability and duration of supply.

Unreliable electricity disproportionately impacts small businesses and rural livelihoods with many resorting to diesel generators for backup, further impacting air quality.

Decentralised Renewable Energy (DRE) solutions can address these problems today. The International Energy Agency (IEA) estimates DRE to be the optimal technology for providing electricity access to 70 per cent of the 240 million un-electrified Indians. Last mile lighting and income generation activities can be powered immediately to move people up the energy ladder till when the grid eventually arrives. Further, decentralized, local generation can be boosted to improve reliability and business productivity even in grid connected areas. Despite the 175 GW renewable energy target out of which 20 GW is proposed to be through offgrid, DRE is still seen as a last option for providing energy access.

Policy support for DRE

There have been a number of recent schemes by the government that can be leveraged to increase the uptake of DRE. These policies are spread across the clean energy ecosystem, including finance, planning and regulation, capacity building and livelihoods. For example,

Finance:

• PSL: Renewable Energy (RE) was included under priority sector lending (PSL) in 2015. Though domestic banks have a 40 per cent target for PSL, there is no specific target for encouraging loans for RE.

• MUDRA: Loans of up to 10 lakhs given specifically for micro and small entrepreneurs and businesses. MUDRA loans amounting to Rs 71,312 crore ($10.5 billion) have been disbursed to 1.73 crore borrowers as on January 2016.

• National Solar Mission: One of the key schemes promoting Renewable Energy uptake in India with a target of 100 GW by 2022, this mission also includes an off grid target of 20 GW. The focus is on routing subsidies through the Bank lending system with the support of the National Bank for Agriculture and Rural Development (NABARD). There is currently a national target for 1 lakh solar powered water pumps through bank loans. A new scheme for Home energy systems (with LED lighting, TV, Fans etc) is being introduced by the Ministry of New and Renewable Energy (the older scheme was only for Solar Home lighting systems).

Planning and Regulation:

• Tax Exemption: Some states like Karnataka, Uttar Pradesh, Maharashtra have created Value Added Tax (VAT) exemptions for solar panels primarily. For DRE enterprises to benefit from this, balance of system components like batteries and inverters, and other pico-RE technologies should also be exempted. In case GST is introduced, it would be ideal for these exemptions to be taken forward.

Capacity building and Livelihoods:

• Surya Mitra: The scheme aims to train 50,000 personnel in five years. Till date, 27 programs have been sanctioned and 360 personnel trained. Sector Skill Council for Green Jobs (SSCGJ) has also been created to train 1500 trainers and accredit 60 organizations towards this goal.

• National Rural Livelihood Mission: Implemented through State counterparts, the Mission seeks to support livelihood promotion in rural areas, primarily through the creation and development of Self Help Groups (SHGs) and facilitating bank linkages. In this programme, there is an opportunity to introduce energy for existing livelihoods or use energy entrepreneurship as a livelihood in itself.

Building the ecosystem

Well intentioned schemes such as these tend to be looked at in isolation by the respective agencies, while in reality they are all part of the ecosystem for clean energy. SELCO Foundation works on building this ecosystem by plugging the gaps in technology, finance, infrastructure, capacity, and policy. For example, despite the PSL notification, bankers in the last mile branches are not confident in lending to end users at the bottom of the pyramid. Banker training workshops have been conducted to increase their awareness about the decreasing risk of DRE technologies, and the end user ability to pay back the loans. For the first time, Karnataka State Level Bankers Committee (SLBC) has shared a district level quarterly target with their Lead District Managers (LDM) for the number of RE loans disbursed under each bank (this is yet to be monitored to determine if it has been effective).

DRE has an important role to play in achieving the clean India targets, but building the ecosystem is even more crucial for long term sustainability. There is a clear benefit in designing clean energy systems as bank financed assets – beyond just replacing a kerosene lamp but as a reliable service to meet various basic needs including livelihoods. The poor become bankable, develop a credit history and have access to mainstream financing. Cross sectoral efforts like Model Village scheme and Smart Cities initiative can leverage the above policies to use DRE as a key input to enabling better education, health and livelihoods. This way, clean energy primarily becomes an input for poverty alleviation and development, while meeting the Clean India targets is only an added benefit

Vivek-ShastryVivek Shastry works with the Policy and Planning group at SELCO Foundation. He is a JN Tata Scholar and a Dual Masters graduate from the University of Texas at Austin.

Views expressed in this article are the author’s and do not necessarily reflect the views of India Inc.
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