AGENDA for ACTION
The world is grappling with the challenge of providing energy access to nearly 2bln people deprived of it.
Alleviating energy poverty poses numerous problems. Most of the energy poor live in remote rural areas making it difficult and costly to connect to the electrical grid. Some energy poor countries simply do not have the infrastructure or economic means to connect rural inhabitants to the grid.
Environmental and climate change issues also makes dealing with energy poverty a tricky situation, mostly because coal remains the cheapest source of energy for much of the world. If electricity was generated from clean, but more expensive sources like wind and solar, rural inhabitants would likely be unable to afford it. Over a billion people are without electricity, so how do they improve their quality of life without adding huge amounts of greenhouse emissions to the atmosphere?
There are two main ways to provide energy sources to hitherto under-serviced population:
1. Grid extension – this involves expanding the existing transmission and distribution system to reach hitherto underserved areas. However, since there is a tremendous shortage of generation assets any extension of the T&D systems has to be met with an associated investment in generation assets to be effective. While there continues to be peak energy deficits and considerable investment still required- mainstream capital, both debt and equity, have supported large scale power generation, transmission and distribution companies and the projects they have undertaken. These are typically large scale infrastructure projects that already command a relatively higher share of mainstream commercial credit disbursed to infrastructure.
2. Distributed Generation and Standalone House Systems – this involves funding decentralized small scale projects and consumable energy items (lanterns, torches, stoves etc). Funding for this category of energy access for low income segments needs specialized and targeted funding with small ticket sizes, understanding of the local conditions and end user requirements. While some of the energy service providers- i.e the providers of new technologies and equipment manufacturers might require larger funding and have access to ‘mainstream commercial’ capital there is a large demand from the small scale enterprise, vendors and distributors, of product/services with last mile connectivity to a dispersed and discrete market-base. Therefore the success of funding energy access is inextricably linked to the success of funding of small scale initiatives in general. Funding small scale ventures is particularly difficult in the social space (such as energy access) there is still little awareness in terms of the business models and without appropriate collateral debt funding is in short supply. There are some widely accepted reasons for the shortfall of funding
- • Lack of sufficient or appropriate collateral
- • Opacity in operations,
- • Dominance of proprietorship pattern of ownership
- • Lack of credit history since the ventures may be less mature or may not have maintained appropriate documentation- issues associated with insufficient and asymmetrical information
- • Lack of credit appraisal system with inadequate risk assessment techniques.
A World Bank survey revealed that most of the small scale enterprises in South Asia faced ‘moderate’ to ‘major’ constraints while accessing bank funding due to high interest rates or inadequate collateral.
Implementing Rural Energy Projects for poverty alleviation
For implementing an effective Village electrification project we may need to first understand the following support system:
- • Physical maps of the area (geological maps) showing topography, forest cover, water bodies etc.
- • Socio –political Map / Census data helps in identifying different groups, fixed and migratory communities, Number of households, adults, women, children , social and cultural values etc.
- • Pre existing energy infrastructure such as proximity to electricity grid/sub stations, gas pipelines, solid fuel availability and delivery system.
- • Availability and proximity to motor able roads, railway tracks, waterways etc.
- • Availability of Schools, Banks, post office, Primary health centers, ponds, wells, tanks etc.
- • Level of education and skill sets of local people will help in understanding the most effective means of communication like posters, leaflets, talks and drama etc.
- • Income levels in community and how is the wealth held – in cash, fixed assets like land, building, capital goods, livestock etc.
- • Decision making process in community, stakeholders, gatekeepers, influence groups
- • Predominant commercial activity /business in the community such as making handicrafts from local produce, pottery, carpet making etc.
- • Whether income is mostly locally generated or comes from elsewhere e.g. migratory workers in other states or foreign countries.
- • How does income vary across the year e.g. with agriculture harvesting, remittance from abroad or regular salary payments from local industry and offices.
- • What is the current level of expenditure by local people per month to meet their energy needs (in cash or kind).
- • An understanding of the ability to pay by local people and their willingness to pay
- • It helps to understand the pattern of expenditure by local people as it helps in understanding their priorities.
- • Sense of ownership and attitude towards theft and pilferage by local community.
- • Modalities for collection of revenue. Who will collect? Where will the cash be kept ? periodicity of collection regular or harvest linked ( payable when able)
The above information may be collected through appropriate survey /consultation at Village level and also to identify Local Entrepreneurs willing to take up energy access projects on a sustainable business model. The key to success in sustainable energy poverty alleviation would rest with identifying willing and committed local entrepreneurs and then enabling and empowering them to take up Energy access Projects using locally available resources. We would also need to impart requisite skills to the Local Entrepreneur and do hand holding till the EA project becomes sustainable.